Like me, youve probably been offered a fair old number of these by now... ..and, if youre like most people, chances are you maybe own at least one or two. They always seem to put in an appearance at just the right (or wrong) moment... It might be Saturday and you've just seen the clothing item of your dreams. That can be a pain, though, if this months paycheck isnt due for another week. You're undecided. Until, that is, you're offered... ..a store card. One of the horrible ironies about store cards is that the vast majority of people who sign up for one actually had no intention of making a purchase before they left the house. But if youre caught in the above situation, the convenience factor frequently wins the day, doesnt it? Add on top of this all the little goodies thrown in as a sweetener... An introductory discount on goods typically around the 10% mark extra money off during sales periods etc... But let me tell you what the sales assistant probably wont... For starters, did you know that many department stores will currently charge you anything up to 30% interest on that little card they offer you? (yes, even those ones with the pretty pictures.) Thats around double the interest of your standard credit card! Sound scandalous? Well, hang around... it gets a lot worse! Here are just a few of the pitfalls you should look out for the next time youre offered a store card... - Buy now, pay within the next three months. Sure...great deal if you do actually manage to pay it off within that time. If not, some stores will charge you interest from the first day you bought!
- Ask questions: In a recent study, it was found that in one third of cases, information on the interest rate on the card (among other things) was not freely available.
- Dont be tempted to take out expensive and often useless insurance. This can be a monthly amount of 1.5%. With interest repayments of 30%, you could end up with an annual rate of 56%!
- Also, steer clear of any payment protection insurance scheme. If you were to lose your job or couldnt work due to illness or accident, youll find that this insurance generally only pays the minimum monthly payment, not the whole balance!
- Be on your guard. Staff will usually ask you to fill in the application form in store. In many cases the insurance box will already have been ticked and you will simply be asked to sign up for insurance.
- Study the terms and conditions carefully in the store. Staff have been known to refuse customers to take away the form.
Probably the worst thing about store cards is that its very easy to build up an array of them so that, before you know it, there seems to be more of them in your wallet than there are coat hangars in your wardrobe. And in what seems like no time at all... .. youve just spent way, way beyond your means! If you feel you must buy on credit why not use a credit card with a low or even 0% rate? After all, if youre going to have debts, you may as well make them cheap ones! A store card might seem handy and convenient but they generally come with a horrendous hidden cost. So next time youre a tempted to take on another piece of plastic, make sure you get all the facts up front. Your bank balance might just thank you for it. Copyright 2004 by Colin McCaig mailto:colin@cmcaig.com |
