CHESTER, England, May 8, 2012 /PRNewswire/ --
- Initial discounts can be tempting but could cost more in the long run
- 36 per cent of people polled say they use a store card
Shoppers who are considering taking out store credit to fund new purchases are being urged not to be tempted by initial discount offers and instead shop around for a better deal which could save them money and earn additional rewards in the long run. Analysis by MoneySupermarket.com, comparing credit and store cards from a number of high street retailers, shows a big difference between the interest rates charges, and the rewards on offer.
The UK's number one comparison site looked at interest rates, introductory offers and ongoing rewards across a variety of High Street retailer credit and store cards, to calculate where the biggest savings can be made beyond the initial retail offers.
Interest rates on store cards range from 19.9 per cent to 29.9 per cent APR representative, while rates on retailer branded credit cards are on a par with other credit cards at 15.9 - 16.9 per cent APR representative. As a result, someone making £500 worth of purchases on a Burtons or Dorothy Perkins store card at 29.9 per cent representative APR, would accrue £141.07 in interest over the year, if they just paid off the minimum amount each month.
In comparison, many retailer issued credit cards offer consumers a competitive interest free deal or rewards for purchases. The Marks & Spencer Credit Card and the Tesco Clubcard Credit Card both offer cardholders 15 months interest free on purchases, plus ongoing reward points for using the card. Credit cards are also widely accepted around the world, whereas a store card is generally limited to the retailer or group of retailers owned by the same parent company.
Kevin Mountford, head of banking at MoneySupermarket.com said: "Shoppers using a store card to buy now and pay later won't be too surprised that it is a costlier way of paying for purchases; however they may not be aware of the huge savings to be made just by shopping around for other options for their purchases. An interest free purchase card can be a great alternative for people who have a big purchase coming up and need some extra time to pay it off, and the amount saved in interest can be used towards their goods, or to pay off their card. In addition to the promotional offers, many of these cards also offer ongoing rewards, helping maximise your spend. However, shoppers should ensure they pay their balance off before the interest-free period ends and make sure they repay their bill on time, otherwise they will lose the promotional rate."
MoneySupermarket polled its users on their attitudes to store cards and found 36 per cent of people use them. Of this, 60 per cent pay it off each month and a third open a card for the initial discount offered, then don't use the card again. A separate 20 per cent say they are put off store cards as the interest rates are so high.
Many store cards tempt shoppers with introductory discounts or vouchers at point of sale if you sign up for the card. For example, the New Look store card offers 20 per cent discount off the first purchase plus additional cardholder discounts and offers. However, a retailer credit card offers ongoing rewards on all shopping on the card, no matter where you shop. For example, the John Lewis Partnership card offers 1 point for every £1 spent in John Lewis and Waitrose stores and 1 point for every £2 spent elsewhere. Every 500 points earned is worth £5 in John Lewis vouchers.
Kevin Mountford continued: "It's good to see that some store card users are making regular payments on their card each month, meaning they won't be hit by late fees and high interest on repayments. Our findings also show a large number of consumers are lured into using a store card based on the discount offer at the time. Whilst some introductory deals could be worth looking out for, the benefits on offer will often be negated by high interest rates if the card holder cannot afford to repay the balance in full. There are a number of credit cards designed for purchasing that also provide rewards for consumers, such as the Marks and Spencer credit card, so it is worth shopping around and reading the small print to check. Alternative credit cards such as cashback cards can also help people maximise the return on their spending as long as they repay the balance in full.
"While it can be tempting to open a store card just to take advantage of the initial discounts being offered, opening a card does require a credit check and can impact your overall credit score. Taking out a store card and using it responsibly; staying below the credit limit and making regular payments can help improve your rating, so can be suitable for people who don't have a history of using credit. However, use it irresponsibly and it will have a negative impact and could potentially prevent you from getting credit in the future. It is important to consider your options before signing up for any credit product, otherwise that latest fashion accessory could end up costing far more than shown on the label!"
MoneySupermarket has a SmartSearch credit profiling tool to help those looking for the best credit card deals for their circumstances. The tool matches the customer's credit profile against the card they are most likely to be accepted for, but doesn't leave a footprint on their credit file.
Notes to editors:
What's your attitude to using store cards?
I have at least one which I pay off each month (21.9%)
I have at least one and only repay the minimum (2.4%)
I get store cards for the initial discounts but then don't use them (12%)
I have no store cards as the interest rates are so high (19.6%)
I have no store cards but I would consider getting one (1.1%)
I have too many that I can't keep track (1.1%)
I'm not interested in store cards (41.9%)
**Tables to show current credit card and store card offers
Store Specific Cards
Provider Introductory Offer Ongoing Rewards 10% off in store café and restaurants Free active fraud monitoring Debenhams Store Card GBP20 Debenhams voucher protection 15% off voucher with first statement to use on an GBP80+ spend Free standard delivery twice a year on spend over GBP50 GBP5 off voucher on a 10% off in store during the first Top Shop Store Card GBP50 spend week of summer and Christmas sales New Look Store Card 20% off you first purchase Exclusive discounts and promotions Receive a Dorothy Perkins Free delivery when you spend Rewards card that offers GBP40+ online Dorothy Perkins Account Card up to 25% off in store Exclusive cardholder discount days GBP60 worth of vouchers Buy now pay later options Homebase Store Card when you receive the card available in store and online 10% off suits throughout the year 10% off sale items throughout the year 10% off everything online Burtons Store Card GBP5 off GBP30 voucher throughout the year
Interest Interest over 1 over 1 year year based on based on Provider Rep APR GBP500 GBP800 Debenhams Store Card 19.90% GBP93.85 GBP150.17 Top Shop Store Card 19.90% GBP93.85 GBP150.17 New Look Store Card 28.90% GBP118.26 GBP189.21 Dorothy Perkins Account Card 29.90% GBP141.07 GBP225.71 Homebase Store Card 29.90% GBP119.69 GBP191.50 Burtons Store Card 29.90% GBP141.07 GBP225.71
Retailer Credit Cards
Provider Introductory Offer Ongoing Rewards Receive 1 point for every GBP1 spent at M&S or GBP2 spent elsewhere 100 points = GBP1 M&S Reward Marks & Spencer Credit Card 0% on purchases for 15 months voucher Receive 1 point per GBP1 spent at John Lewis, JohnLewis.com, Waitrose, Waitrose.com, John Lewis Insurance and Greenbee.com 1 point per GBP2 spent elsewhere Every 500 points you earn is worth GBP5 John Lewis Partnership Card 0% on purchases for 6 months in vouchers Double Nectar Card points for every GBP1 spent on your card in Sainsbury's for the first 2 years One Nectar Card 0% on purchases for 6 months point for every 0% on balance transfers for GBP5 spent Sainsbury's Nectar Credit Card 15 months (3% fee) elsewhere 5 points for every GBP4 spent in Tesco stores 5 points for every GBP4 spent on Tesco fuel 0% on purchases for 15 months 1 point for 0% on balance transfers for 9 every GBP4 Tesco Clubcard Credit Card months (2.9% fee) spent elsewhere
Interest Interest over 1 over 1 year year based on based on Provider Rep APR GBP500 GBP800 Marks & Spencer Credit Card 15.90% GBP0.00 GBP0.00 John Lewis Partnership Card 16.90% GBP31.38 GBP50.21 Sainsbury's Nectar Credit Card 16.90% GBP31.38 GBP50.21 Tesco Clubcard Credit Card 16.90% GBP0.00 GBP0.00
Sourced by http://www.MoneySupermarket.com 01.05.2012
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