Store card interest rates rumble up

Tuesday, 11 November 2008 08:05

Interest rates on store cards are rising in the push for profits on the high street up to Christmas.

The average interest rate on store cards now stands at 25 per cent - with some providers pushing up rates by four per cent.

Over half the firms on the market charge over 27 per cent - data from MoneyExpert.com show.

Cards at Principles and Oasis now have APRs of 28.9 per cent. Burton's store card charges 29.9 per cent APR, while the Creation Account Card - which can be used at Sainsbury's, Woolworths, JJB Sports and Selfridges - charges 30.9 per cent for payment other than by direct debit.

This compares with an average credit card rate of 16.9 per cent.

Credit cards are also more likely to offer 0% interest offers - with 64 per cent of deals on the market providing interest-free periods of three to 12 months.

Only one store card is cheaper than the average credit card - the Fortnum and Mason card at 15.3 per cent.

Sean Gardner, director of MoneyExpert, said: "Store cards can be a useful way of qualifying for instant discounts but when it comes to borrowing they are a complete rip-off.

"The fear must be that with other forms of credit running dry, desperate consumers will be tempted into expensive deals as a last resort for Christmas."

While many people signing up to store cards - tempted by money off shopping and exclusive deals - will pay off the full amount before interest charges cut in, one in 10 shoppers were still clearing Christmas debts incurred 12 months previously.

"If any of those debts were on store cards the interest alone could have been huge," Mr Gardner said.

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