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Having a store card that you can use to buy your Christmas gifts is a great convenience, especially if it for a department store that has a wide selection to choose from for everyone on your list. However, there are pitfalls associated with overspending on a store card in the higher rates of interest charged on the unpaid balance each month. You can really get yourself into financial difficulty if you are not able to pay off the outstanding balance each month and thus avoid paying the interest. In many cases the minimum monthly payment may not even cover the amount of interest and if it does, the amount that goes toward paying off the balance is so small you will hardly notice a difference. This Christmas is likely to be worse than ever with more and more people turning to store cards to buy the gifts they need because of the downtown in the economy and the limitations on receiving credit and loans from banks and other lenders. Even credit card companies are feeling the brunt of the recession and are not approving people for store cards in the large numbers that they have been in the past. This means that consumers are having to turn to store cards as a means of paying for the extra purchases for Christmas gift-giving. Store cards are very tempting, especially when you see something in the store that you really want to have or at a lower price than you have seen elsewhere. Before you get caught in the trap of running up the balance of your store card, you should ask yourself if this is something that you really need to have. Contemplate the cost of buying with your store card and know that you can repay the full amount so that you don’t incur any interest charges. If you are unable to pay off the outstanding balance when you receive your statement, any discounts you have received on the items you purchased will be wiped out in the interest you have to pay on this balance. Many consumers get themselves into real financial difficulty by using store cards indiscriminately and then have to spend many months or years trying to pay off the balance. The cost of the purchases is also spread out, which will make them more expensive than if you had paid the higher price at another store. The interest rate charged on store cards is often as much as 40% higher than that of standard credit cards. Even though these rates have been investigated by the Competition Commission, they are still in place. Take note of the interest rate charged on your store card before you use it and if you must use this card try to use it to your advantage. If you do overspend you could find yourself in debt for years. If you have a low credit score and you feel that by using a store card and making regular payments you can work towards raising your score. However, this may not be the case. You could actually lower your score if you run up the balance and are unable to pay it off in a timely manner. If a store card is the only way you will be able to manage your Christmas shopping this year, prepare a budget for the amount that you can afford to spend and pay off before the statement due date. In this way, you can benefit from using the card and avoid the pitfalls associated with it.
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Alisdair Cosgrove has been writing credit card hints and tips for many years and can find more of his work at the UK site www.CreditCardsBureau.co.uk, offering best credit card offers for UK residents and also a great selection of rewards credit cards.
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