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 a credit card, you can use a store card to buy things on credit and pay them off at the end of the month or in stages to spread the cost.
And just like with a credit card, you’ll be charged interest if you don’t repay in full.
The interest rate is usually even higher than for a credit card.
You might 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 used to come with a discount on your initial purchase, but firms have agreed not to offer deals within the first seven days, so you’ve got chance to change your mind (you can cancel the card within 14 days).
After that, you might be offered vouchers or discounts – such as 10% off purchases for three months or cardholder-only reductions, or free delivery when you buy online – as incentives to encourage you to use your credit limit.
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.
For example, Tesco, Sainsbury’s, John Lewis and Marks & Spencer all offer a store-branded credit card which can be used anywhere (just like a bank credit card) 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. These are all marketing initiatives to encourage you to use their store, or card, and spend money shopping either with cash or on credit.
- Discounts and freebies. You might get discounts or money-off vouchers after the first 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. Don’t be tempted to over-spend just because of the discounts or vouchers.
- Higher interest if you don’t repay the outstanding balance in full each month. 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 be given detailed information and an explanation of how the card works before signing up. But some sales assistants might 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
“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!”
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 - the APR shows the cost of purchases after any introductory period so is a good way of comparing a credit card and a store card, particularly if you’re not eligible for a 0% credit 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 have to pay, but you should always aim to repay as much as you can, otherwise it could take you a long time and cost you a lot to pay off any outstanding balance. Also paying the minimum can have a negative effect on your credit rating.
Consider setting up a Direct Debit to make sure you never forget a payment.
Before you commit
Even if you’re confident you’ll 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.
Or go for a 0% credit card if you can - but check the 0% rate covers purchases as well as balance transfers.
What should I do if I miss a payment?
If you’ve already missed payments and are not able to come to an agreement with your lender, it’s best to get advice as soon you can, especially if you’ve got other debts as well.
See our guide on how to prioritise your debts to help you work out which ones to pay off first.
Find free confidential debt advice online, over the phone or near to where you live using our debt advice locator tool.
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