The pros and cons of store cards

Store cards are everywhere, similar to credit cards but more expensive and store specific. Most of us have one because they offered a discount on a purchase you were going to buy.

The sensible ones among us accepted the discount then paid the card off before the interest was added. To use the card without paying it off is a really expensive way to borrow money. If you still owe money on it, take out a bank loan and pay it off.

The world of store card changed last weekend when new rules were brought in. Shop staff will not be paid commission to sign you up; neither can a discount or incentive be offered until you have been signed up for a week. Stores are now also obliged to train staff about store cards.

The point is to break the connection between discount and signing up for a high interest card, not necessarily to stop customers running up extra credit card debt. Store card use has considerably fallen in the past few years, and the new rules could see stores leaving the market altogether.

In the UK alone there are over 31million credit card holders who will now each receive annual statements from the issuers. This will make it easier for customers to compare, contrast and switch.

The statements will show our total spend, the amount repaid and the total charges and interest fees we have run up. They will show a breakdown of balance transfers, cash advances, foreign transactions, point-of-sale spending and all charges for each transaction.

Some companies are already sending them out, but if you haven’t had yours it should come about a year after you opened the account. The government and credit card ‘industry’ agreed a range of changes that started to happen in January 2011.