The cards you're conned into using

Banking and Borrowing

John Fitzsimons
18 May 2010 | 5 Comments

More than 40% of us are pushed into taking out these awful cards which do nothing but harm.

I’m never at my happiest when I’m in the queue at any sort of shop, but one thing guaranteed to get me riled up is when the people in front are wooed by the offer of a discount on their shopping if they take out a store card.

They just nod along as the sales assistant (who, let’s be honest, probably neither knows nor cares about credit cards) talks about the supposedly fantastic discount on offer. Rarely will they ever even mention the rates of interest, which tend to be completely stratospheric – 30% APR, or even higher.

It drives me nuts to see so many people willingly signing up to debt at such ridiculously punishing levels.

The only time I’ve ever signed up for a store card was to pay for my other half’s engagement ring, and that was only because they were offering a year free of interest. Similarly, if you can be 100% sure you will be able to pay off the store card bill in full at the end of the month, it can be worth taking out a store card to get the discount. But even then, you're subjecting your credit report to scrutiny and possible rejection, which won't look good to future lenders.

If, however, you can't afford to pay for what you spend immediately, steer well clear of store cards. To pay 30% in interest over the course of a year in order to get a 10% discount is lunacy and can quickly send you spiralling into serious debt.

Under pressure

Related goal

Pay off credit card debts

How to destroy your credit card debt quickly and effectively.

Do this goal

Despite the danger associated with store cards, according to new research many of us have been on the receiving end of undue pressure to sign up to one of these dreadful credit cards.

According to a study by MyVoucherCodes.co.uk, of those shoppers who do have a store card, a pretty disturbing 42% said they had been pressured into taking it out. Indeed 19% reckoned they were tricked into signing up for the card, and didn’t fully understand the consequences.

That’s one in five of all card holders suggesting they were duped, which is pretty damning.

So if you have been coerced into taking out one of these cards, what should you be doing to get rid of that debt? And what credit cards should you instead be using for your shopping?

Adopt this goal: Pay off credit card debts

For those in debt

According to MyVoucherCodes.co.uk’s study, a whopping 66% of people who have used store cards are currently in debt as a result. And with the staggering rates of interest they charge, that debt can get awfully big, awfully quickly.

The best way to get rid of debt on a credit card, without overly punishing yourself, is to get a card that offers 0% interest on balance transfers for a fair while, giving you time to pay it off in stages.

While there are still some cracking deals around, offering you more than a year free from interest, if you’re in this position I’d advise you to act fast. As I wrote about recently, the lenders are cutting those 0% periods sharply, so these deals may not be around for too long.

Here are some of my favourites:

Card	0% balance transfer period	Balance transfer fee
Yorkshire Bank	16 months	3%
Natwest Platinum	15 months	2.9%
Royal Bank of Scotland Platinum	15 months	2.9%
Santander Credit Card	15 months	3%
Virgin Money	14 months	2.98%
Nationwide Gold Visa	13 months	3%

For big spending

If you have managed to clear the debt from store cards, chances are you have learnt a bit of a lesson about how to spend properly on your plastic friends. And if you know you are about to spend a lot of cash on something – perhaps a wedding, or a big holiday – there are ways to spread the payment pain.

For sensible shoppers

However, if you are the sort of shopper that only spends money you already have, and pay off your bill in full each month, you have the choice of a range of cards that offer you real rewards for the spending discipline you show.

Fancy making some free money just by being clever with your credit card? These are the plastic friends you need!

First of all, you can get cold, hard cash back as a reward, with the American Express Platinum Cashback Card the top option. With this very clever card, you get a whopping 5% cashback on all of our spending in the first three months (up to a maximum of £100), followed by tiered rates of up to 1.25% depending on how much you spend over the course of the rest of the year.

However, you might instead prefer non-cash rewards for your spending. For example, you can bag yourself a free holiday if you go for one of these credit cards, as they are linked to the various Airmiles schemes, allowing you to jet off for a weekend abroad just by doing your usual shopping on your credit card!

Alternatively, you might prefer simple rewards, like vouchers to use in your favourite shops. Personally I’m a big fan of the American Express Rewards card, which gives you three points for every £1 you spend in supermarkets, two points for each £1 in department stores, and one point for each £1 spent elsewhere. Once you hit 5,000 points, a £25 voucher is on its way to you. What’s more, so long as you spend £500 on the Express Rewards card in the first three months, you’ll get a bonus 6,000 points!

However, there are plenty of alternative reward cards which also offer you something back for your spending. Have a read of The top six rewards cards to see which one is best for you!

Watch this video: The top cards for stoozing!

More: The seven biggest money mistakes | You just lost £410 bailing out Greece!

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Comments

Jugalug
20 May 2010
JCof Ramsgate, you could get one of those high interest charging cards offered to people with damaged credit records, like the Vanquis card - if you pay off the full amount owing every month then the huge interest will not kick in and damage you and you will build up a better credit record again. I agree, though, that retailers are very devious indeed about hiding the fact they intend doing credit searches and sometimes these are done carelessly, showing up as three or four searches, all done on the same day, and which then count massively against you. If you then contact Experien or Equifax to rectify this, you get a load of mumbo jumbo in return and are told you cannot, unless the retailer agrees!! In my case, despite a fantastic credit record with no defaults ever and a high income, I was still refused a BHS card for a pathetically low amount of moeny - I am really angry I allowed myself to be duped into applying as I have now been really damaged severely by the incomprehensible rejection.
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JCofRamsgate
19 May 2010
I got lumbered with a CCJ only because I did not understand the legal process, which has obviously had a knock-on effect out of all proportion to the few hundred pounds outstanding on a credit card on which I was making consistent minimum payments without fail every month. Last summer my house sale went through, and I paid off EVERY outstanding amount. I moved into a rented house and needed to buy decent wardrobes. I chose my timing carefully as I could pay the deposit before the sale, and the balance after, when the money was in the bank. Homebase were offering three months interest free deferred payment. What they did not tell me was that this was on a store credit card, and they went away and did the credit check without informing me this was what they were doing, and needless to say this was declined. Had I known I would never have allowed them to do this, but it would have meant one job off my plate just after moving. When I complained to the store manager, he clearly did not understand my anger, and could not have cared less that they had put another black mark on my credit record. A few weeks later, I was not able to initiate a dongle broadband contract, presumably for the same reason. I would like to have a credit card simply so that I can gain the (tiny) interest on the money in my savings account, but it cannot be done at the moment - unless anyone else knows any better!!!!!
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Jugalug
18 May 2010
I've spent the past few years paying off credit cards and store cards and have steadfastly refused all the offers of store cards for ages. I've never had any arrears or CCJs ever and all my debts are paid on time and have been for years. I've been double-paying my mortgage since December as I'm on a good contract at present, and I have an excellent income and bank record. And I keep an eye on my credit files with Equifax and Experian every month or so, so I can pick up on any untoward activity. I finally agreed, a few weeks ago, when spending about £400 at BHS, to a store card so I could get the discount and then cancel it. Plus there was no queue behind me and their whole process is now online. I was somewhat surprised to hear that the application was being "considered" and I would hear by mail. Lo and behold, a letter pops up a few days later, declining the application, giving the reason as the Equifax information. I checked Equifax details again, as I was quite stunned, and the record looks fantastic - accounts paid on time, every time, lots of settled agreements (old paid up loans / car HPs etc) , mortgage great, same address for 10+ years, on electoral roll, no recent searches etc etc. I have a few credit cards all well within limits which I use for purchases; am not quite at the point of paying them off entirely every month but am steadily getting there. Should I write to the plonkers who have made what appears to be a patently ridiculous decision or is it just a waste of time? And have I now managed to damage my impeccable credit record with this refusal for a miniscule amount of credit on a store card from a bunch of twits who clearly have no concept of risk ?
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