Many people have store cards, particularly for larger high street shops such as department stores. They can be something that shoppers will automatically turn to when they want to buy things in a particular store. If they want new clothes, for example they may just pop it on the card. But is this a good idea?
How do store cards work?
Store cards are rather like a credit card. You use them instead of cash to buy items in the store which issued the card. After approximately six weeks you will get a statement for the card, which will show everything that you have bought and how much it costs. You will get the option of paying off a minimum amount which will cover the interest on the card for the outstanding balance or you can pay off the full amount owed and pay no interest. You may also pay any amount in between the two, although the statements tend not to make that clear. So, if you repay everything that is owed by the date specified you will pay no extra, however, if you pay off some of what is owed, whether that is the minimum that they require or a bit more, you will be charged interest on the outstanding balance until it is repaid. Interest on store cards tends to be fairly high compared with other forms of lending.
Advantages of store cards
A store card can be very advantages, particularly if it is for a shop that you use regularly. You might be able to access to early sale previews or early previews of new season items. You may get discounts as well. What you actually gain will depend on the card issuer and it can be worth looking into this before you take out the card so that you are able to decide whether this is a good choice for you. Some store cards will also have rewards on them which could give you discounts.
Using a card can also be a very convenient way to shop. You will not have to spend too long paying and worrying about having enough money as you can use the card. You will have a credit limit, like you get with a credit card but it can still make it easier to buy things than with cash. You will also be given a credit limit so you will be able to spend up to a certain amount, this means that if you also have a credit card, rather than using that, you can use the store card and allow yourself to spend more money.
Disadvantages of store cards
If you use a store card to buy things that you would normally buy and pay it off in full, then they can be very good You will be able to take advantage of any offers that you get associated with the card and you will gain form it. However, some people do not use the cards like this.
Firstly, some people might buy more things than they normally would because they know that they do not have to pay for them right away. This will mean that they could get into trouble by not being able to afford this. Although they will only need to repay a small amount when their statement comes, they will pay interest on what they owe. If they leave that unpaid for a long time, they will end up paying lots of interest. It can be hard to see those costs building up because you will have to pay the interest each month and not pay very much off what you owe. It could mean that you will never seem to clear the card and if you keep spending on it then you may never pay it off at all and just keep paying that interest out all of the time.
So, whether it is a good idea to buy clothes on a store card will very much depend on you and how you use the card. If you use it for convenience and repay it each month then you will be able to take advantage of the card and not pay anything for it. However, if you spend a lot on it, do not monitor what you are spending and do not pay it off in full, then you could end up paying lots of interest which could be extremely expensive for you. Do make sure that if you do have a card that you use it sensibly. You will know whether this is something that you are likely to do or whether you are likely to get out of control and spend much more than you can afford to repay. It can be a good idea to only take out the card if you trust yourself and even if you do to carefully monitor your spending. Look up the balance online or write down what you are spending so that you know how much this is and you will be able to be confident that you can repay it. Once it gets too much, stop spending on it.