Over the past two months I have done a lot of shopping. First Christmas and then the sales have seen me being dragged through as many shops as the rest of the year combined, and in almost every shop I was offered a store card. These can be very tempting since the discounts offered can be generous and it seems to make financial sense.
Avoid store card debt
The downside, however, that is never mentioned by the smiling ladies on commission is that store cards have APR’s that vary from the quite high to stratospheric. Many have reached 30%.
Store cards don’t pose a problem if you are disciplined enough to pay off the balance within the interest-free period (typically between 35 and 55 days). But, if you can’t pay the outstanding balance each month, the interest due on the unpaid debt can soon mount up.
A recent survey has also pointed the blame at store cards for another problem. Up to 20% of people who take out debt consolidation loans are failing to remove other sources of credit. Store cards are a major part of this as people mistakenly believe that if they have cut up their troublesome credit cards the store cards can remain.
Take advantage of store card offers only
The general rule with store cards is that with discipline they can be used to take advantage of the discount offers and then the balance paid off before the end of the interest free period. If you think you may not be disciplined enough to be able to do that then do not take one. As soon as the interest free period has ended then the interest payments will start to reduce the value of the discount and will soon outweigh it entirely.
With interest rates at 30% there are clearly cheaper ways than obtaining credit than store cards and they do rely entirely on the attention grabbing discount available when you sign up. A much better option is to take out a credit card, with interest rates of 14% or lower this means that although the discounts will not be available to you the interest payments will be manageable and not leave you with a large and growing debt problem.
Accumulating problems: Help with Credit Card debts
Credit cards can undeniably make one’s existence a great deal simpler. Substantially easier to use than cash, they’ve turned into an indispensable household item in this age of online shopping. In line with the UK Obligations Council, there are presently close to 70 million credit cards in circulation in the United Kingdom, roughly one per person and often two or more per household. It’s precisely their effectiveness and ease, however, which invites credit card holders to overstretch their limits. Continuously and systematically, the amount of UK people carrying credit card debt has risen of lately. Additionally, consumers have started to accrue credit card debt on several accounts and so in total are holding greater debt on each. For a number of people, this rotating bank card debt has converted into a significant problem requiring specialist advice. Today, really, it’s regarded as one of the greatest debt problems within the UK in general, alongside overdraft borrowing.
Credit cards are one of the biggest debt issues in the UK
At least partly, the issue has been triggered by massive campaigns from credit card companies during the downturn to sign up as many new clients as possible without having to pay attention to their financial situation. A couple of those contracts do not motivate to manage the debt wisely but actually invite holders to build up even more debt: Most cards, for example, just make holders repay around 5 percent of the outstanding monthly balance.. Without fixed obligations to reduce bank card obligations quickly, interest costs can continuously accumulate for a very long time. Rather alarmingly, fourteen percent of credit card holders today are keeping debts on their card for more than 5 years.
Fortunately, these particulars have lately been met with government countermeasures. A completely new number of rules designed to help credit card clients stay in control of their debts should substantially reduce future risk.