What are store cards and are they worth it?

Store credit cards might sound like a good idea, but they can be a lot more dangerous than they first seem. Here's why saying "no, thanks" could save you £100s.

Credit: Dean Drobot – Shutterstock

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, and 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, they won't be right for everyone – as we explain below.

What is a store card?

Store cards are essentially 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'.

Store cards allow shoppers to make purchases on credit (potentially with money they don't currently have) and pay it off in monthly instalments – so it's similar to using a regular credit card.

You might 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.

So before you get one, please read on to find out why we at Save the Student have concerns about store cards.

6 disadvantages of store cards

Here are some reasons not to sign up for a store card:

1. You could pay more on purchases with store cards

   

   Credit: Pixel-Shot - Shutterstock

   Agreeing to a store credit card means you can pay for what you buy in monthly instalments.

   However, this could result in you paying more for your purchases. 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. They're 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 shopping somewhere, pick up a loyalty card instead.

2. Store cards are like credit cards with added pressure

   Most store cards in the UK offer similar benefits to credit cards. For example, they let you borrow and spend money and spread the costs over a longer period. The key difference is that, while you can use a credit card to shop wherever you want, a store card restricts your spending to that store alone.

   This is why stores that offer them tend to promote them quite heavily to customers. If you have a store card, you might feel obliged to shop with them over other stores.

   Another pull is that the application process can be very quick. Technically, stores do run credit checks, but it's unusual to hear of anyone being turned down for one. We 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, making them quite dangerous.

3. They are sold by sales assistants, not financial experts

   Store cards often have higher interest rates than credit cards. As such, they can get you in serious hot water if you can't keep up with repayments. This just adds to how shocking it is that sales assistants can give them out.

   Through no fault of their own, many sales assistants won't be adequately trained to sell financial products. This means they may not always realise the danger they could be putting you in by pushing the card.

   What's worse is that staff are sometimes given targets to meet with some incentive to work towards. For example, if they sign up 10 new customers to a store card, they could win an extra day's paid holiday.

   This could explain why they're encouraging you to sign up – not because they genuinely think it's a good deal (no matter how convincing they may seem).

4. Store cards have high interest rates

   

   Credit: Josep Suria – Shutterstock

   It might sound tempting to get a 10% discount on your shopping on the day you sign up for a store credit card. But, this isn't a good deal in the long run.

   Why? Interest rates on these cards are generally 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 pay it off in full in time.

   What's more, the discount that first drew you in usually only applies to your first purchase with the card. After that, the card likely won't offer many (if any) other savings.

   Although it might make sense at the time to save a bit of money, you could pay for it (and then some) in the long run.

5. They can damage your credit rating

   Your credit rating can affect everything from your mobile phone contract to how big a student overdraft limit you get.

   If you fail to keep up with repayments on a store card, this can harm your credit rating.

   We have a full guide on how to check and improve your credit rating for more information.

6. 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/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, there's a chance the junk mail will continue (unless you remember to opt out!).

How to use store cards to your advantage

If you're a savvy shopper and feel confident you can play the store card game (taking into account the risks), there are ways to use them carefully.

That initial discount incentive some store credit cards in the UK offer can be useful if you're making a larger purchase that could save a tenner or more.

If the discount is really selling it to you, you could always sign up for the card to get the discount and pay it off immediately. That way, you shouldn't accrue any interest.

However, for this to work, you need to have enough money to cover it ASAP.

Read the T&Cs and check if the discount is only available for the first purchase. If that's the case, you could close the account as soon as you've paid off the initial transaction and ask to be removed from the mailing list.

Thinking about getting a credit card? Our guide to student credit cards explains their pros and cons.