Debts & Loans

SHOPPERS using store cards to buy Christmas presents could be plunged into mounting debt because of sky-high interest rates, it has been warned. The cards, which can be obtained from 31 high street retailers, effectively act as credit cards for an individual store.

Most have a minimum credit limit of £250, and shoppers can apply for the cards in stores and be given credit within a few minutes. Of the 31 store cards available, 20 have an interest rate of more than 25 per cent. Trish Carpenter, manager of Southend’s Citizens Advice Bureau, said the cards trick people into making quick decisions, which they may later regret.

She said: “The problem with anything we can sign up to on the spot is we do not think about it in the same way as we would normally.

“It is so easy for people to use store cards to increase their spending power without thinking about how they are going to pay it all back.”

The cards are also deceptively easy to obtain.

Store assistants asked our reporter basic questions, including name, address and income, performed a quick credit rating check and then handed over as much as £250 of credit to spend immediately.

The entire process took about 15 minutes. Ms Carpenter said the ease of applying for store cards meant they were at the heart of many people’s debt problems.

She said: “Almost all of the people we see who are struggling with their debt have run into some sort of difficulty with store cards. It is a real problem here and everywhere in the country. “You have to realise who is lending you the money in the first place.

“These are not the individual stores, they are big finance houses. “The volume of credit they give out means it is a problem for them if people do not repay, which is why they will chase relatively small debts as if they were a major loan.

“While I would never say to anyone you should not use credit, I would advise them to make sure they can pay it back.

“The interest rates on these cards is so high the amount people owe can grow very quickly and be nothing like what they have actually spent.”

Among Ms Carpenter’s top tips for avoiding debt are setting aside a specific amount of cash before a shopping trip and only spending that money.

For those shoppers already in debt, Ms Carpenter said the first step is always to ask for help.

She said: “Always seek advice."

“The earlier people ask for advice, the more solutions there are to their problem.

“The longer they leave it, the harder it will be to sort out the issues and free them of their debt.”