A guide to store cards

Handle with care. That’s the most important thing to know about store cards. They can be useful if you’re disciplined enough to always pay back what you owe each month, but if not they can be expensive – so check whether other credit options are better.

How they work

A store card is basically a credit card you can only use with one high street chain or group. Like with a credit card, you can use a store card to buy things on credit and pay off the bill at the end of the month. And just like with a credit card, there are charges and interest if you don’t pay the minimum payment on time. These can be higher when compared to some credit cards.

You may be asked if you have a store card or if you would like to have one at the till when you pay for your shopping. They can come with an initial discount which sometimes gets offered only after the first seven days – perhaps 10% off purchases for three months – and extras such as money-off vouchers, cardholder-only reductions, or free delivery when you buy online.

You must be at least 18 to get one. As with any credit card, you’ll also need to undergo a credit check.

Not to be confused with…

Be careful not to confuse store cards with credit cards linked to shops. Tesco, Sainsbury’s, John Lewis, Marks & Spencer and Asda all offer a store-branded credit card which can be used anywhere and not just in the named shop.

And store cards are not the same as reward cards or loyalty cards. Reward cards – like Nectar or Tesco Clubcard – allow you to collect points on your shopping which you can use later to get money off your bill or swap for goods and services.

Pros

  • Discounts and freebies. You may get introductory or occasional discounts or money-off vouchers, usually after an initial period of seven days. But remember, if you don’t pay off your entire bill the interest could cost you much more than the discounts are worth. Read more on this below in the section on charges and fees.
  • Can be a good deal with your favourite store. The only time you should consider getting a store card is if you regularly spend a lot with a particular store – and even then, you need to be absolutely in control of your money. You should consider setting up an arrangement to pay your store card bill by Direct Debit so you can be sure not to forget a payment.

Cons

  • High interest if you go into debt. Store cards often charge much higher interest than your average credit card.
  • You can only use store cards to pay for things within that particular high street chain.
  • They’re often sold by sales assistants, not financial experts. You should receive information and an adequate explanation of how the card works before signing up. But some sales assistants may not have enough training on the credit aspects. If you’re not sure of anything, ask questions, and make sure you don’t sign until you understand what is involved.

Charges and fees

Case study

“I thought I did well getting 10% off a suit with a store card – but I forgot to pay the bill, and ended up paying even more in charges. I’ve now cut it up!”

Michael

Store cards usually charge far higher interest rates than the average credit card. Take a look at the Annual Percentage Rate (APR) before you sign up. It will help you compare the cost with other ways you could borrow depending on how you use the card.

To avoid paying interest, you should always try and pay off your bill in full each month. Your statement will show you the minimum amount you can pay. But if you stick to paying just the minimum amount, it will take longer to pay off any outstanding balance you have on your card.

Before you commit

Even if you’re confident you will pay the bill in full every month, before you decide to take out a store card compare the store card discounts with cash-back credit cards too, which offer cash-back at all stores.