Store cards can be tempting for shoppers as they offer money off purchases and a host of other benefits - but they rarely offer good value for borrowing.
For those who can afford to pay off their balance each month it can be worth taking advantage of the benefits of store cards. Cash-conscious shoppers on the hunt for discounts can save as much as 20 per cent on purchases by using them.
But, of course, many people don't end up clearing the debt in full and that's how the card operators make their money.
Christmas shopping: Store cards offer discounts to lure in cash-strapped shoppers If you find yourself lumbered with debts on store cards, here we explain how to move them to a cheaper rate and get it paid off more quickly.And for those interested in taking advantage of the benefits of store cards, we explain how to negotiate the small print and avoid paying potentially hundreds of pounds in fees.
High Street store card fees - the high cost of splashing out Smallprint: Latest store card figuresSource: Moneyfacts - provided exclusively to This Is Money. Correct as of January 7
STORE CARD TRAP: A CHARGE FOR NOT SPENDINGAs if the high APRs aren't bad enough! Some store cards even bill you for being in credit.Santander Cards, which runs store cards for Topshop, Harvey Nichols and Burton among others, will charge up to £10 if, for example, you make a purchase, but later return it and don't buy anything else for three months.They can also charge if you do not use your card within a six month period - it's called a 'dormancy fee' - although 30 days notice must be given to the cardholder.The charge, which was introduced in December 2010, applies to all store cards supplied by the Spanish-owned bank including (but not limited to):• Burton• Debenhams• Dorothy Perkins• Evans• House of Frasier• Laura Ashley• Miss Selfridge• Monsoon• Outfit• Russell & Bromley• Topshop/Topman• WallisRemember...If you use a store card, pay off your debt as quickly as possible.
With a store card, you should be getting a 10 or 20 per cent discount off your initial purchase.
That sounds tempting, but if you reach the end of your low-interest period and start paying the 30 per cent interest that is common, savings will be quickly cancelled out.
And if you miss a payment and get hit with big fees, costs will soon spiral.
Paying off your store cardsThe main concern for store cardholders is avoiding the eye-popping interest rates which typically start being charged after around 60 days.
The temptation to spend on the cards often leads to people splashing out and then discovering they can't clear the debt straightaway.
The worst hit find themselves with debts on multiple cards that they are struggling to pay off.
Consolidating card debts together using a 0 per cent balance transfer credit card is perhaps the best way to avoid sky-high interest rates.
Because these cards offer a period in which no interest will be charged, every pound you pay can go directly towards reducing the size of your original debt.
Repay within the interest-free period, or switch after that to another 0 per cent deal if you haven't repaid.
Usually you will need to pay a fee to transfer your debt - around 3 per cent of the balance. There is also a requirement for debt to be transferred within a set time frame.
Be warned: These cards are usually only an option if you you have a good credit rating, and some card operators will not grant cards if you have applied for credit with them during a specified preceding period.
Rates will also depend on factors including your income, debt balance and repayment plans.
And remember, while balance transfer cards often come with a 0 per cent period for new purchases as well, you are trying to repay debts, not build up more. So think hard before buying anything else with credit.
0% balance transfer - Some of the bestBarclaycard Platinum 24 month - longest 0% dealIntro balance transfer offer: 0 per cent for 24 months, 3.2 per cent fee (the lowest among its competitors)
Intro purchase offer: 0 per cent for 3 months
APR: 17.9 per cent
Restrictions: You must transfer within 60 days and earn a minimum income of £20,000. You can't transfer debt from other Barclaycards
Benefits: Contactless payment for purchases up to £20. Transfer more than £2,000 and get a reduced fee of 2.1 per cent.
Barclaycard Platinum 23 month - second longest 0% dealIntro balance transfer offer: 0 per cent for 23 months, 3.2 per cent falling to 1.9 per cent fee - 1.9% HANDLING FEE APPLIES
Intro purchase offer: 0 per cent for 3 months
APR: 17.9 per cent
Restrictions: The way the fee is charged seems a bit confusing. To start with, 3.2 per cent is charged but a sum is refunded so that the fee effectively falls to 1.9 per cent as long as certain conditions are met. The refund is then credited to you within 28 days. The lower fee means this card could prove a better bet than the 24-month Barclaycard, if you can pay it off one month earlier.
You must transfer within 60 days and have a minimum income of £20,000
Benefits: Contactless payment for purchases up to £20.
HSBC Visa
Intro balance transfer offer: 23 months, with a 3.3 per cent fee
Intro purchase offer: 0 per cent for 3 months
APR: 17.9 per cent
Restrictions: Although this card could potentially offer a nice, long 0 per cent balance transfer deal, to be eligible you must be an HSBC current account holder. HSBC will also look closely at your credit rating.
NatWest/RBS - second longest 0% deal, but high fee
Intro balance transfer offer: 23 months, 0 per cent, 3.5 per cent fee
Intro purchase offer: 0 per cent for 6 months
APR: 17.9 per cent
Restrictions: You must transfer within three months and have a minimum salary of £10,000. Although it's the joint second longest balance transfer card available, the fee is quite a lot higher than the Barclaycard competition. You can't transfer from other NatWest or RBS cards
Benefits: 20 per cent off at Buyagift.com and 10 per cent off short breaks with Superbreak. There is also an additional cardholder option available.
Other top 0% transfer deals available include Tesco Clubcard credit card with BT, 0 per cent for 22 months, Halifax Credit card, also 22 months, and Nationwide Credit card, 20 months.
More... So much for the young and financially reckless - it's the over 60s who are racking up store card debt now Prepaid debit card offering no limit on cashback - including from John Lewis - signs up 100,000 users Low fee 0% balance transfers
If you can clear your debts more quickly than the 0 per cent periods detailed above, you might be able to get a balance transfer card with a more reasonable fee, which will cut the overall cost of paying off your store cards.
Pick the card that with the lowest fee that still gives you a realistic timeframe for you to pay off your debt.
If you find you can't pay off what you owe by the end of the 0 per cent period, try to transfer what's left to a new 0 per cent card.
Some of the best low fee balance transfersBARCLAYCARD PLATINUMBalance transfer length & fee: 12 months 0 per cent, 0.9 per cent fee
Rep variable APR: 19.9 per cent
Restrictions: The cardholder must transfer within 60 days and have a minimum income of £20,000
A 1.2 per cent fee is charged but a sum is refunded so that the fee effectively falls to 0.9 per cent as long as certain conditions are met. The refund is then credited to you within 28 days. Once again, you can't transfer debt from other Barclaycards.
NATWEST/RBS PLATINUMLowest fee for balance transfers
Balance transfer length & fee: 0 per cent for 13 months, 1 per cent fee
Rep variable APR: 17.9 per cent
Restrictions: Must transfer within three months and have a minimum income of £10,000.
This is a good offer if you can repay you store card debt more quickly.
It also only charges a 1 per cent fee if you transfer within three months.
MBNABalance transfer length & fee: 14 months 0 per cent, 1.25 per cent fee
Rep variable APR: 18.9 per cent
Restrictions: You must transfer within 60 days but there is no minimum income. This card has an added benefit of offering 14 months at 0 per cent on money transfers, although CHARGES A 4 PER CENT HANDLING FEE.
Click here for more of the best credit cards available for balance transfer options.
