Store Cards – Are You Storing Up Problems?

Summary:
The number of people with one or more credit cards has grown at an unbelievable rate in recent years. Like the mobile phone, the credit card has become a way of life for many people, something they’d be lost without.

The offer of a store card for your favourite store can be tempting and may offer opening discounts, invitations to special events (encouraging you to spend money in the store, of course) and the familiar “If you take out the card today, you’ll get 10% off your...

Article Body:
The number of people with one or more credit cards has grown at an unbelievable rate in recent years. Like the mobile phone, the credit card has become a way of life for many people, something they’d be lost without.

The offer of a store card for your favourite store can be tempting and may offer opening discounts, invitations to special events (encouraging you to spend money in the store, of course) and the familiar “If you take out the card today, you’ll get 10% off your purchases. It won’t take very long; we can fill the form in now. You may as well take advantage of the offer and get your discount at least.” You know how it goes and yes, there are some things you’d like and the discount is worth thinking about. Before you know what’s happening, you’re giving details of your current account etc., etc., etc.

It’s a familiar scenario. Over 40% of people who sign up in this way had no intention of doing so when they entered the store, according to the Office of Fair Trading, and yet they may well make a major purchase.

This isn’t a problem if you have the money available to clear the balance within the interest free period, which can be from 35 to 55 days, in most cases. However, if you’re unable to meet this time-limit you need to be aware that the interest on the outstanding balance can soon mount up.

The Consumer Credit card act sets down regulations for any loan under £25,000. Whether or not a total overhaul of these rules is necessary is under consideration.

Data provider Moneyfacts provide some enlightening information regarding the variation in store cards interest rates. John Lewis, which includes Waitrose, has an APR of 13% and Marks & Spencer offer 18.9%, whereas Debenhams and Comets Timecard are currently charging 28% and 29.9% respectively.

Before you sign up to one of these cards, take time to consider:

The discount may be a good deal and if there is a purchase that you are seriously considering anyway and you have the money to fund the purchase within the interest free period.

What is the APR rate on this offer? How much will you be charged on the remaining balance?

There may be an interest free period. How long does this last and when it ends, what rate will be charged?

Payment Protection Insurance will be offered. Check how much this is going to cost and what benefits are offered. This is an option but could prove a blessing under some circumstances, such as illness or redundancy. Read the agreement carefully to find out more.

Remember that you’ll need to budget carefully for store card purchases – it’s easy to overspend.

You don’t need to sign there and then. Take the agreement away and check everything, including the interest free period, APR, default and late payment penalties. Ask questions until you’re satisfied you fully understand everything.

The Office of Fair Trading endorses the above advice. They also advise that you compare the store card with other payment methods.

Don’t be hassled into taking out a card you don’t want by some pushy person who doesn’t really care whether or not you’re getting what’s right for you, as long as they get their commission for signing you up!

Remember, as with credit cards, the statements come in monthly. Keep track of your spending. Credit cards with low APR’s are, in general, a better deal than store cards, according to the majority of financial experts.

Take care and weigh up all the options.

Loyalty Cards – Think Again!

Summary:
Are credit card loyalty schemes worth the plastic they’re printed on? According to a recent study by moneysavingexpert .com the answer is a resounding “NO”. The study investigated 80 reward schemes and was especially unimpressed by Tesco’s Clubcard, Nectar and Airmiles. With the average value of each Tesco Clubcard point being worth from 1 to 4 pence, a Nectar point being worth 0.54 pence and an Airmile being valued at 7.9 pence, their reaction is hardly surprising.

In act...

Article Body:
Are credit card loyalty schemes worth the plastic they’re printed on? According to a recent study by moneysavingexpert .com the answer is a resounding “NO”. The study investigated 80 reward schemes and was especially unimpressed by Tesco’s Clubcard, Nectar and Airmiles. With the average value of each Tesco Clubcard point being worth from 1 to 4 pence, a Nectar point being worth 0.54 pence and an Airmile being valued at 7.9 pence, their reaction is hardly surprising.

In actual fact, an expenditure of £10,000 per annum will earn a reward of £50 with Marks & Spencer, John Lewis and Asda, for instance. There is an Egg scheme which would only reward you with £10 per £10.000, although internet banks’ Egg Money Card offers a better rate, at £100. With the Nat West Black card, there is an annual charge of £250 in order to earn £51 per £10,000 of spending! Can you afford to make the saving?

There have been some very big changes in the benefits available recently. Some of the larger stores have ditched their schemes totally, whilst others have radically reduced the rewards on offer. Barclaycard is no longer linked with the Nectar scheme and Tesco has reduced the value of its scheme to new customers. Consumers don’t know where they’re up to with all the changes and this is causing a complete lack of interest in loyalty cards in general.

It appears that consumers are bewildered by the sheer number of different award schemes and it’s virtually impossible to make comparisons, due to clever marketing. The typical one per cent paid by the retailer to the credit card companies is not being returned to the customer and it’s felt that the vast majority of these reward schemes are a rip-off.

The basic idea of stores using the cards to encourage customers to remain loyal, not to mention to increase their spending power, seems sound. The points gained offer discounts on a range of goods, family days out and flights. In fact the rewards are so trivial that it is felt that it’s a far better idea to leave the reward card at home, or even better, bin it and instead use a card which offers rewards via cashback and if using it as a credit card, aim for one which gives a low interest rate.

American Express Platinum offer a 2 per cent cash back deal if you spend more than £7,500 per year, so for £10,000 spent you would be rewarded with £200.

The BAA Worldcard came out well. It pays an impressive £795 for £10,000 spent. They offer discount shopping vouchers which can be exchanged for goods, meals and drinks at BAA airports in the United Kingdom. The GM card offers car discounts. If you buy a new Vauxhall or Saab you will get a £300 discount.

The conclusion is that you’d be better off switching to a cashback type of credit card. There’s a wide choice available and maybe now is the time to make the change.