Store cards have been criticised for charging consumers "extortionate" interest rates, with Argos, Burton and Miss Selfridge named and shamed as the worst offenders.
At 29.9% APR, the three cards are almost five times more expensive than leading credit cards. Next charges 24.99% APR, making it around four times as costly.
Beware 'extortionate' Argos, Burton and Miss Selfridge store cards
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Store cards have been criticised for charging consumers "extortionate" interest rates, with Argos, Burton and Miss Selfridge named and shamed as the worst offenders. At 29.9% APR, the three cards are almost five times more expensive than leading credit cards. Next charges 24.99% APR, making it around four times as costly. By comparison, Lloyds Bank, Bank of Scotland and Halifax all offer credit cards with a 6.4% APR, and they let you spend anywhere, rather than just with the issuing retailer. The high interest rates charged by store cards can significantly inflate the purchase price. For example, someone repaying the minimum balance on a store card for a £450 washing machine at 29.9% APR, would end up paying £43.87 a month, or £526.40 in total. That's £76.40 in interest and 17% more than the list price. Even a more modest purchase, like a £100 winter coat would cost £9.75 a month – based on the same 29.9% APR – or £116.98 in total. Again, this is 17% more than the original selling price. Worse still, only make the minimum payments and you'll see the purchase price soar. The washing machines would end up costing £1,138.34 and take more than 12 years to clear the balance, according to estimates from Moneyfacts. Complete scandal Moneyfacts' personal finance expert Rachel Springall says: "Store cards are a complete scandal for customers if they don't pay off the balance as soon as they have made their purchase, because these cards charge extortionate interest rates compared with other reasonable credit cards on the market. "Shoppers are likely to be persuaded at the till to take out a store card … but they should never assume that they are getting a good deal. "For example, the lowest interest rate they could achieve on a normal credit card is just 6.4% APR – and that's before we even get to cards that charge 0% interest on purchases for a limited period." Since 2011 retailers have been banned from paying commission to staff for getting customers to open store cards and from offering shoppers an instant discounts as an incentive to take out a card. Shops can only apply a discount on an account after a seven-day period. However, many retailers still off staff a range of 'benefits' linked to store card account openings but insist jobs are dependent on store card sales.
Source Moneywise http://ift.tt/1ED6Q6m
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