When buying things in stores and from online vendors, you usually have a few different payment options to choose from. Whether you’re on High Street or connecting with sellers on the internet, major credit cards, direct debits, and store-issued cards are among the most common ways to pay. Various electronic wallets are also available, which can help expedite payments by way of your mobile phone.
When you spend money at brick-and-mortar locations, cash is another easy payment alternative, but modern shoppers often forgo using actual currency. With several ways to proceed, there really isn’t a single best way to pay for goods – it comes down to your personal preferences. However, a look at British spending habits illustrates a costly habit adopted by many UK consumers. It seems buyers often opt for store cards, which can be an expensive road to travel.
High Interest Rates on Store Cards
Retail spending is a hallmark of modern consumerism. You’re not likely to stop visiting your favorite stores and retail websites. It can be argued that exercising moderation is a prudent course of action, no matter how you choose to pay, but when using store-issued credit cards, it’s particularly important to keep aware of the cost of financing.
Typical major credit cards carry an annual percentage rate (APR) of 18.9 per cent, or lower. Your store card, on the other hand, may have an APR as high 39.9 per cent. If you’re one to make monthly charges and then wipe the balance clear each month, interest rates don’t have much of an impact on your overall spending. However, if you tend to carry over balances from month to month, each billing cycle piles on hefty finance charges. Over time, your credit burden can grow heavy, under the weight of expensive store card interest obligations.
When planning purchases, you can always explore short-term financing options, from no-credit-check lenders, or put by money in advance. But impulse shopping can result in hard to manage store card balances.
Understand What You’re Getting Into
Managing debt and credit are personal experiences, so each consumer takes an individual approach. As long you understand the implications of your financing choices, and take responsibility for the consequences, there’s no cause for alarm. It is thought some English shoppers don’t recognize the potential problems posed by store cards – namely, their high interest rates.
New research shows 9 out of 10 Britons feel their outstanding store card balances are “nothing to worry about.” There’s nothing inherently wrong with this optimistic attitude about store card debt, until you consider that only 1 in 20 of those surveyed felt the same way about their credit cards. These responses may be a sign that card users are under the false impression that major credit cards are more economical than store cards, while the opposite is true.
The Lure of Store Cards Has a Downside
Store accounts make it easy for you to shop, and there’s no waiting, once your card has been activated. As a result, users are compelled to buy on impulse, rather than making measured spending decisions. The tendency is further complicated by promotions and discounts offered by the stores issuing immediate credit.
The retailer, Next, will give you £10 off your first shop as a reward for opening an account. Once established, your APR is 22.9 per cent. Debenhams gives you a full week to shop with 10 per cent off, but the store’s APR is 24.9 per cent. Argos charges 29.9 per cent APR on card purchases. If you’re willing to open a store account carrying a 39.9 per cent APR, the retailer, Very, will give you a 20 per cent discount on the first order you place with your new card. Free ship promotions can also cause you to spend more than you intend, in order to meet the spending threshold required to get the deal.
An often overlooked aspect of store cards, which can lead you down an expensive path, is their limited scope. Each card or account is only valid at a particular store, so you may be compelled to open several accounts, with various retailers. Keeping too many active accounts can harm your credit score and prompt unwise spending.
With several retail payment options to choose from, it’s important to recognize that some payment methods cost more than others. Store cards have high interest rates and promotional offers can cause you to spend irresponsibly. Before opening multiple accounts with your favorite retailers, examine the interest rates and terms on each card, so you know exactly what to expect when repaying store card charges.