What are store cards and are they worth it?
Store credit cards might sound like a good idea, but they can actually be a lot more dangerous than they first seem. Here's why saying "no, thanks" could save you £100s.
At first glance, store cards sound great. They can offer discounts for signing up, and the chance to "buy now, pay later". But, before you get one, bear in mind that they are like credit cards, so there are a few potential issues you'll need to consider.
If you're confident you can play the store card system without getting caught out, then they can be good options. However, we wouldn't recommend them for the majority of students. Read on to find out why.
What is a store card?
Store cards are basically credit cards that can only be used in one particular store – this is why you might have also seen them referred to as 'store credit cards'.
They allow shoppers to make purchases on credit (so often with money they don't currently have) and pay it off in monthly instalments – just like credit cards. You'll often be offered store credit cards in larger department stores, but a lot of high street stores offer them too.
Wondering if you should get a store card? While we accept that it is possible to use them to your advantage, we'd also argue that their dangers aren't generally made clear enough by shops.
Before you get one, please have a read of why we at Save the Student advise against getting them.
7 reasons not to sign up for a store card
Here are some of the main disadvantages of store cards:
You could pay more on purchases with store cards
Agreeing to take on a store credit card means you can pay for what you buy in monthly instalments, which should be much easier on the purse strings, right? Unfortunately not.
We would never advise anyone to take on a store card with the intention of borrowing money with it. This will only result in you paying much more for your purchases, as interest on your card balance piles up if you don't pay it off immediately.
Remember that store cards are ultimately a form of marketing, and a ploy to convince you to shop with this particular store instead of their competitors.
And who enjoys that sort of forced loyalty? If you want to be rewarded for being loyal, pick up a loyalty card instead.
Store cards are like credit cards with added pressure
Most store cards in the UK offer similar benefits as credit cards (i.e. allowing you to borrow and spend money, and spread the costs over a longer period of time). The only difference is that while you can use a credit card to shop wherever you want, a store card restricts your spending in that store.
This is why stores that offer them push them so hard on their customers – if you have a store card, you’re likely to feel obliged to shop with them over others that don’t offer a store card.
Another pull is that you can literally walk into the shop and walk out with a card. Technically, stores do run credit checks after you've made your first purchase, but we're still yet to hear of anyone being turned down for one, and personally know people who have been accepted despite having a very low credit score.
In short, these cards are extremely easy to get your hands on, which is what makes them so dangerous.
Young people are prime targets for store cards
It's worth being aware that, as a young person, you're actually the perfect target for these cards... and it's for all the wrong reasons.
Staff are specifically told to sell them to students and young people, as they know they’re the demographic most likely to take the risk of signing up without asking too many questions.
Store cards are essentially sold to customers as free money, with many people not fully knowing what they’re signing up to.
They are sold by sales assistants, not financial experts
Store cards have higher interest rates than most credit cards, and as such, they can get you in serious hot water if you can't keep up with repayments. This just adds to the overall craziness of sales assistants being given the responsibility of dishing them out.
Through no fault of their own, many sales assistants won't be adequately trained to sell financial products. This means that they may not always realise the danger they could be putting you in by pushing the card (although they are just doing their job, of course!).
What's worse is that staff are often given targets to meet with some sort of incentive at the end of it to work towards (e.g. sign up 10 new customers to a store card and win an extra day's paid holiday).
This is why they’re pushing so hard to get you to sign up – not because they genuinely think it’s a good deal (no matter how convincing they may seem).
Store cards have high-interest rates
It might sound tempting to get a 20% discount on your shopping on the day you sign up for a store credit card. But, this is most unfortunately not a good deal in the long run.
Why? Well, interest rates on these cards are normally charged at a rate of between 25% – 30%.
As a result, any discount you receive on the day will be majorly overshadowed by the amount of interest you'll need to pay on top of the balance if you don't immediately pay it off in full.
What's more, the discount that first drew you in usually only applies to your first purchase with the card – so after that, there's often no saving to be made with the card at all.
Although it might make sense at the time to save a bit of money, you'll certainly pay for it (and then some!) in the long run.
They can damage your credit rating
If you fail to keep up with repayments on a store card, this can have a very negative impact on your credit rating. Not to mention the fact that every time you sign up for a new financial product like this, it's marked on your credit report.
We have a full guide on how to check and improve your credit rating for more information.
You will be bombarded with junk mail
If all the above hasn't convinced you that getting a store card is a bad idea, maybe the colossal amount of junk you'll get through your door and to your email inbox will be the clincher.
And believe it or not, even if you end up with a court summons for not paying up, your credit score is in the pits and you've cut your card into pieces after cancelling your account, the junk mail won't end.
It's likely that they'll STILL send you mail to your house with offers to try and get you to sign up again. But this time you will resist!
How to use store cards to your advantage
If you're a savvy shopper who's confident they can play the store card game (taking into account all of the risks), then don't just play it – own it.
That initial discount incentive some store credit cards in the UK offer can be useful if you're making a larger purchase that could mean saving a tenner or more.
If the discount is really selling it to you, you could always sign up to the card to get the discount, pay it off immediately so you don't accrue any interest and then close the account. However, we would never advise going for this option unless you've definitely got enough money to cover it ASAP.
Read the T&Cs and check if the discount is only available for the first purchase you make. If that's the case, close the account as soon as you've paid off your initial transaction and ask to be removed from the mailing list.
Thinking about getting a credit card? Our guide to student credit cards is full of advice on their pros and cons, as well as our top picks.