Problems in store for using the wrong card

Splashing out using your store card can often turn sour when the statement arrives…

If you are like me, you have probably left a little too much of your Christmas shopping to the last minute. When that happens, the temptation is often to rush around the stores, madly buying presents you hope will be appreciated by those who receive them.

I urge you not to be panicked into spending more than you can afford – and as important, to use the right plastic card to make your purchases with. In particular, think twice before you splash out with a store card.

It’s easy to be dazzled when a sales representative speaks of the merits of a store card. Nearly all of them offer exciting incentives – from discounts, to vouchers, to freebies.

For example, Dorothy Perkins’ store card includes a 20% discount voucher sent twice a year; Miss Selfridge offers 10% off your first purchase with the card; Warehouse includes a 20% off voucher with your first statement once you’ve started your spending.

It all sounds too good to be true – but no, these deals are legitimate. The only problem is that there also some hidden truths to discover – in the form of huge interest rates.

All of the cards outlined above have interest rates at 29.9% APR. This means that if you’re not able to pay off the amount in full when the statement arrives you’re going to be stung with a hefty charge.

The good news however, is that there is an alternative – in the form of 0% purchase credit cards.

According to our credit card comparison tool you could pick up a 0% purchase credit card with a 0% period that lasts as long as 12 months. This means that you could spread the cost of Christmas over a longer period without the interest charges – though of course it is still important to pay off your balance before the offer rate expires.

The market leading 0% purchase deal is currently offered by the HSBC Bank Credit Card – with 12 months at 0% (typical APR of 15.9%). Also offering a good deal is the Capital One Platinum which offers 0% on purchases until 01/08/08 (9.9% typical APR).

Of course you are now unlikely to receive your credit card of choice before Christmas, which is why you should also look for 0% balance transfer deals.

For example, the Capital One Platinum also offers 0% on balance transfers until 01/08/08. This means that after your Christmas shopping spree you can simply transfer the debt over in the New Year – a 1.7% handling fee applies.

As an additional tip, think twice before taking out extended warranties on electrical items this Christmas.

According to the consumer group Which? breakdown cover on electrical goods can cost almost half as much as the items themselves and yet is often unnecessary as shoppers have statutory rights which mean that in some cases, stores should repair faulty goods even after 12 months - when extended warranty cover would start.

If you do opt for an extended warranty don’t be rushed into making a decision - retailers must offer extended warranties on domestic electrical goods on the same terms for 30 days if you choose not to buy there and then. This includes any discount.

Indeed the same applies to store cards too. Don’t make a rash decision – think about your options and play your cards right.

DISCLAIMER: Please note that any rates mentioned in this article applied at the time of writing and may no longer be applicable today.

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