Store Cards

Despite new rules to protect the UK's 11 million store card holders, analysis from money website, Fool.co.uk reveals that stores are still ripping off customers, with some charging almost 50 per cent more interest on their store cards than credit cards.

The Competition Commission brought in new regulations, in May 2007 to govern the administration, of store cards that charge annual percentage rates (APRs) of 25 per cent or more.

However, Fool.co.uk has found that clever store card providers have beaten the Competition Commission at their own game by flying just below the 25 per cent threshold. Some have even managed to increase their interest by as much as 7 per cent, and yet remain under the stipulated 25 per cent.

Since the new rules came into force there has been an average drop in store card interest rates of 0.7 per cent from around 25 per cent in May 2007 to an average of 24.3 per cent APR today.

The three main offenders, who have increased their interest rates since May 2007 and hover under 25 per cent are Ikea up 7 per cent to 19.9 per cent; Marks and Spencer, up 4 per cent to 23.9 per cent and Debenhams up from 1 per cent, to a whopping 19.9 per cent.

However, some stores, have worked in favour of their customers, by lowering their rates of APR, such as the four, following stores which have dropped their rates since May 2007, and now fall below 25 per cent.

Oasis, has fallen down 5 per cent to 24.0 per cent;  Jaeger down 2.1 per cent to 24.9 per cent, shoe and accessories store, Russell and Bromley down 6 per cent to 23.9 per cent and Laura Ashley down 10 per cent to 19.9 per cent.

The four worst store cards, which remain unchanged since May 2007and have to comply with the Competition Commission's recommendations, all have an extortionate rate of 29.9 per cent, Burton, Dorothy Perkins, Miss Selfridge and Warehouse.

Ed Bowsher, Savings Expert at Fool.co.uk said: “Store cards are the devil in disguise. They initially offer attractive benefits and bonuses, which can be hard to resist - but there is a downside to grabbing these discounts and deals.

“Store card-holders should be aware of the high interest rates which come hand in hand with introductory offers - and should remember that these cards are designed to make you spend, rather than help you save money.

“If you've spent on a store card and are still paying off the balance, that debt could be costing you far more than it needs to. However, by making use of a 0 per cent balance transfer credit card, you could avoid paying any interest for up to 15 months.”

Fool.co.uk’s tips for shopping sensibly with a store card, include not being seduced into spending more by special or introductory offers; remember the card is designed to cost, not save you money.

If you do spend on a store card, pay off your balance in full, every month within the interest-free period. This is usually around 51 to 59 days.

If you're paying interest on an old store card debt, transfer your balance to a 0 per cent balance transfer card.  Alternatively, getting a cheap life of balance transfer card would allow you to pay a fixed low rate of interest until the full debt is paid off.

Finally, avoid buying massively over priced Payment Protection Insurance.