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Like me, you've probably been offered a fair old number of
these by now...
....and, if you're like most people, chances are you maybe
own at least one or two.
They always seem to put in an appearance at just the right
(or wrong) moment...
It might be Saturday and you've just seen the clothing item
of your dreams.
That can be a pain, though, if you're a little short on
cash for that week.
You're undecided.
Until, that is, you're offered...
....a store card.
One of the horrible ironies about store cards is that the
majority of people who sign up for one actually had no
intention of making a purchase before they left the house.
But if you're caught in the above situation, the
convenience factor frequently wins the day, doesn't it?
Add on top of this all the little goodies thrown in as a
sweetener...
An introductory discount on goods - typically around the
10% mark - extra money off during sales periods etc...
But let me tell you what the sales assistant probably
won't...
For starters, many department stores will currently charge
you anything up to 30% interest on that little card they
offer you (yes, even those ones with the pretty pictures.)
That's around double the interest of your standard credit
card!
Sound scandalous?
Well, hang around... it gets a lot worse.
Here are just a few of the pitfalls to look out for the next
time you're offered a store card...
- Buy now, pay within the next three months.
Sure...great deal if you do actually manage to pay it off
within that time. If not, some stores will charge you
interest from the first day you bought!
- Ask questions. In a recent study, it was found
that in one third of cases, information on the interest
rate on the card (among other things) was not freely
available.
- Don't be tempted to take out expensive and often
useless insurance. This can be a monthly amount of 1.5%.
With interest repayments of 30%, you could end up with an
annual rate of 56%!
- Also, steer clear of any payment protection
insurance scheme. If you were to lose your job or couldn't
work due to illness or accident, you'll find that this
'insurance' generally only pays the minimum monthly
payment, not the whole balance!
- Be on your guard. Staff will usually ask you to
fill in the application form in store. In many cases the
insurance box will already have been ticked and you will
simply be asked to sign up for insurance.
- Study the terms and conditions carefully in the
store. Staff have been known to refuse customers to take
away the form. In fact, a recent survey showed that only
23% were allowed to do so.
You'll often find that if you want all the immediate
benefits, you have to take the card straight away. Not the
greatest idea when you want to weigh up the pros and cons
that come with a financial commitment.
Probably the worst thing about store cards is that it's
very easy to build up an array of them so that, before you
know it, there seems to be more of them in your wallet than
there are coat hangars in your wardrobe.
And in what seems like no time at all...
.... you've just spent way, way beyond your means!
If you feel you must buy on credit why not use a credit
card with a low or even 0% rate? After all, if you're
going to have debts, you may as well make them cheap ones!
A store card might seem handy and convenient but they
generally come with a horrendous hidden cost.
So next time you're a tempted to take on another piece of
plastic, make sure you get all the facts up front.
Your bank balance might just thank you for it.
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