An IVA may not be suitable in all circumstances.
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Store cards allow you to borrow money to purchase items from a particular shop, or chain of shops, and then pay it back typically at the end of the month. However, if you’re unable to repay what you owe then you will start accruing interest. This can be very expensive and you might find yourself paying back a lot more money than anticipated.
Store cards can be extremely tempting as having the option to ‘buy now, pay later’ can be useful. This is especially true when products must be purchased, such as before Christmas or when something needs to be replaced.
However, the terms and conditions of store cards can be surprising. What started as a few innocent purchases can quickly turn into debt. As interest continues to accrue and the outstanding balance grows, it can be difficult to picture a time when the store card clears.
Our advisors hear this story all too often. If it sounds familiar, that’s because we frequently deal with cases where store card debt becomes unmanageable. We’ve helped these people, we can help you too.
If you are thinking about getting a store card, then here are some important things to note about them before you make your decision:
The rate of interest on store cards can be surprisingly high. Typically from 20% up to 30%* – although this figure can be higher – it’s not unknown for shoppers to acquire a store card without understanding this.
*According to GoCompare, 'Store Cards', July 2020.
Often store cards draw you in by giving a percentage discount on your first purchase. For example, they may say you’ll get 20% off a handbag if you pay for it on your store card. If you do manage to pay the store card by the end of the month then you will have saved money. However, if this payment is missed you will begin paying a high level of interest which might have made it cheaper to purchase on your credit card.
In one case study, published through the Money Advice Service, someone who thought they were getting a good deal by paying on a store card actually ended up spending far more in charges*.
* According to the Money Advice Service, 'A guide to store cards', August 2012.
Store cards are usually only accepted from the chain that you bought it from. This may just be one shop or include the other brands the store owns. A store card for John Lewis is also likely to work in Waitrose. However, this is still limited compared to a credit card which you can use anywhere. It also might mean you don’t shop around for the best deal as you only go to one store.
Store cards are often sold by sales assistants at checkouts. This means people can purchase them without having full knowledge of the credit aspects. As sales assistants aren’t qualified financial advisors, they are unlikely to know if a store card is the right form of credit for you. Make sure you do your research and know the full terms and conditions before committing to one.
Have you been getting warnings about your store card being in persistent debt? This means you have only been making the minimum repayments on your account for the last 18 months.
It is a good idea not to ignore these warnings and get help if you’re struggling with your store card repayments. First you should contact the store, sometimes they will be able to freeze the interest on your account.
If you find yourself in store card debt, then don’t worry. You can get in touch with our team of specialist advisors. With no obligation on your part, we can assess your circumstances, listen to your story, and find your ideal debt solution. You can contact us through the application form or call us via 0161 543 3758.
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* As of 10/02/22 20,601 of our customers were in an active IVA. ** Average unsecured debt anticipated to be written off for IVAs approved between 1 January 2021 and 31 December 2021 for FSS customers is £10,645.20, based upon successful completion. *** Based on independent verified reviews from Feefo.
Yes, store cards can help you build credit if you pay them back on time at the end of every month.
Store cards are categorised as a non-priority debt which means they can be included in a wide variety of debt solutions. If you want to identify which one would be best for you, then get in touch with our team of specialist advisors.
Your store card debt is unlikely to be cancelled after six years. As long as you owe the shop money and they are in contact with you, they can continue to chase you for it.