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Store Cards Play with the devil and win

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Store cards are the devil's debt; most charge a hideous 25% plus interest, and even the best aren't better than high street credit cards. Yet it's possible to play with the devil and win.

The trick is to get the card, get the discounts and then pay it off immediately, so you don't pay a penny in interest. We tell you how to play the system and win.

Credit CardWhat's a store card?

Store cards work and feel very much like credit cards, except that while credit cards can be used anywhere, store cards can only be used in a specific store or store group. They're often confused with loyalty cards, yet with store cards you can ‘pay and borrow'; loyalty cards just gather points.

It's important not to confuse store cards with store-branded credit cards; Tesco, Sainsbury, Asda, John Lewis, Marks & Spencer all have these. These are a different breed and can be used anywhere. Many have loyalty schemes attached - eg Tesco's Clubcard credit card.

Credit CardWhy the devil's debt?

In a nutshell; because these are dangerously easy to obtain, hideously expensive, manipulative beasts.

  • Their exorbitant rates. Around two thirds of the major store cards on the market charge over 25% interest, some are nearly 30%. This is a huge amount, massively more than a standard, never mind competitive, credit card.

  • They're commonly mis-sold. These cards are often pushed on us by untrained shop staff, who've little idea of the impact and associated dangers of such a high interest rate card. They're simply told to flog them and are usually incentivised for signing people up.

  • They're targeted at the young. This is the first piece of credit many young people get and young people need to be aware of how to manage them - so often we hear that someone has taken one out without the understanding that they need to pay them back.

  • They hide the fact this is debt. The common sell on the card is a 10% introductory discount, which sells people into debt whilst never explaining the consequences.

Gold Bars

The Golden Rule

"Never, ever, ever, ever, use a store card to borrow on.
If you have one, whatever the reason, always ensure you pay off in full."

Alternatives to store cards...

  • If you do need to borrow to spend: use the Best 0% Spending Credit Cards. Use these cards if you're spending to borrow, though always have a plan in place to repay the debt before any interest free period ends.

  • If you already have debts on a store card: if you've debts that you can't immediately pay off, then at least make sure you're not paying interest on them. Use a 0% Balance Transfer Credit Card, transfer the store card debt to it, then pay off in full before the 0% balance transfer period ends - you can save £100s in interest on expensive debts.

Credit CardTime to hit back... dancing with the devil

It's possible to profit from a store card, but only if you never use them for borrowing on. As we already mentioned - interest rates can be around 30%, so make sure you pay the card off in full as soon as you get the statement.

Reasons to use a store card...

dancing partners
  • Grab the initial discount offers. Many store cards offer a bribe for signing up – such as 10% off the first time you spend on it. Don't simply blow this on buying a £10 T-shirt, where you'd save £1; wait until there's something larger you need to buy anyway, then use it. A 10% discount on something costing £200 means you'd save £20.

  • Better still, do it with friends. To be even more cunning, ask friends & family if they want anything from that store too. Buy it for them (get them to give you the cash so you can pay it off) and you max the discount.

    And if you bought your friends' stuff, they can always sign up, get a discount, and return the favour.

  • Membership benefits. Many store cards have special store card holder evenings and offers, a bit like a membership club. And there's nothing wrong with keeping a store card just for this.

  • Negotiate. Some sales assistants can get excited when you take out a store card as they have targets to meet. It's always worth haggling a little to see if you can get a bigger discount, or get them to throw in a voucher for the store as well.

Credit CardSome current store card intro offers

Walk into many shops on the high street and they'll try and flog you a card with your shopping. Yet offers change, you want at least a 10% introductory sign up for it to be worth the hassle.

Some of these cards allow online applications too, the following is a list of stores and discounts, however please remember – only do this if you will pay off in full at the end of the month, otherwise don't touch it with a barge pole.

Store Card Offers (change regularly and vary from store to store)
£10 off £40 voucher in welcome pack;
10% off all online purchases;
10% off suits in store;
10% off sale in store, plus VIP discounts (as and when);
£5 voucher off £30 spend on your birthday.
Dorothy Perkins
Stamp rewards when you spend (no minimum) in store (eg stamp 1 gives 10% off in store on day of account opening; stamp 4 gives 20% off in store, stamp 6 gives 25% off in store).
This is not a store card but a credit card with a loyalty scheme.
£5 reward voucher with first statement;
Free online delivery for cardholders;
Double points for first 3 months.
Laura Ashley
This is not a store card but a credit card with a loyalty scheme.
500 bonus points on first order (equals £5 voucher to spend in store).
Miss Selfridge
Stamp rewards when you spend £35 or more (eg stamp 1 gives £4 off; stamp 4 gives 20% off, stamp 5 gives £10 off).
New Look
20% off first purchase.
10% off sale items in the first week of sale;
Free UK delivery on online orders four times a year.
15% off first shop when spending over £80;
£5 voucher off £50 spend in your welcome pack;
Free UK delivery on online orders twice a year.
15% off in store on day of account opening;
£5 voucher off £30 spend on your birthday;
Extra 10% discount on sale items in store.
Double points on first purchase and 20% off in welcome pack when you spend on card on day of opening.

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Think before adding the 'insurance'

Payment protection insurance is commonly sold with credit cards - the idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

There have been a myriad of cases where it has been missold eg, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined.

The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.

Always be vigilant to check you aren't getting more than you bargained for when you fill in the application, then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.

Credit CardWill it hit my credit score?

tick boxes

Signing up to lots of store cards (or lots of credit cards for that matter) can damage your ability to gain new credit, yet if you've a good credit score there's no need to be unduly worried; there are no hard and fast rules, but many have successfully applied for more than ten cards with no problem.

It's not how many, but how often that counts.

Each time you apply for a card, a search is added to your credit file. Lots of these in a short space of time will shoot down your credit score; the overall number of applications is less important than the frequency.

If you're grabbing discounts, spread applications out every few months or so and cancel old cards; don't just cut up any card you won't ever use again. Other factors that count include total debts, repayment history and income.

Pick applications wisely and never bag a store card intro discount just before needing credit elsewhere – this includes applying for a new contract mobile phone, car or home insurance, as well as loans, mortgages or credit cards for borrowing (read Your Credit Rating How it Works).

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