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Store cards

Store cards can seem tempting, but consider the pros and cons and whether a credit card or loan would be a better option.

Key points

  • Store cards are not the same as loyalty cards
  • Taking out a store card will impact your credit record
  • They can be an expensive way of spending and borrowing
  • Try to pay off any debt in full before it starts accruing interest
  • A credit card could offer better rewards and/or lower borrowing rates than a store card


Are store cards different to credit cards?

Store cards can be an expensive way of arranging credit when compared to credit cards, loans and other options.

That’s because the interest on store cards tends to be much higher than on other credit card. 

Store cards are often dressed up with discounts and special offers, so you might not realise that they’re different to loyalty cards. 

Store card features

A store card can be handy if you're a loyal customer at a certain shop and you’re sure you can pay off your balance at the end of the month.

But you need to consider the interest rate as well as the following:

1. Grace period - Some cards have a grace period. This is essentially an interest-free time frame before interest is charged on your transactions. 

If a store card doesn’t have a grace period then you'll start accruing interest from the time you make your purchase.

2. Introductory offers - Store cards are unlikely to have an introductory offer. Instead, they tend to offer an immediate discount on your shopping. Retailers might also offer perks like free delivery, future discounts or ‘VIP’ offers. 

However, without a grace period or introductory offer, interest charges on the outstanding balance can outweigh these benefits.

Choose a card that suits your needs. If you’re Christmas shopping, for example, then a 0% purchase card may be something to consider.

3. Impact on your credit score - A store card will affect your credit score. That means it could impact future credit applications, which you need to consider if you're trying to maintain or build your credit rating - perhaps if you want to apply for a mortgage.

Store cards, store-branded credit cards and loyalty cards

Don’t confuse store cards with credit cards offered by big retailers (such as supermarkets). A store-branded credit card can be used anywhere, while a store card can only be used for purchases with that chain.

Then there are loyalty (or reward) cards. Every time you shop you collect points, which can be used for money off your bill, or to purchase certain products or services. 

What's the standard interest rate on store cards?

When any promotional rates have ended, the APR typically ranges from 20% up to 30%, but can be higher.

You need to understand this rate to calculate how much your purchases will cost you over the full term of your repayment plan.

How long will you take to clear store card debt?

Be realistic when judging how long it’ll take you to clear store card debt.

This is especially important around Christmas. It’s an expensive time of year and an early December pay cheque means a longer gap between pay packets.

Having another payment go out your bank account is the last thing you need, particularly if you’re accruing interest on the debt in the meantime.

Store freebies and discounts

Check Facebook, Twitter and websites for discounts and vouchers from the retailer.

You could even try haggling.

Certain department stores and websites have price match guarantees or discounts for damaged packaging. Why pay for a pristine cardboard box when it's going to end up in the bin?

These discounts may outweigh the benefits of a store card - and they won't impact your credit score.

Before committing to a store card...

In summary, the golden rules are:

  • Do your research
  • Check your alternatives
  • Understand the terms and conditions
  • Be realistic with your payment plan

Last updated on 29 Jul 2020