Rip-off of store cards

By Pam McClounie

Last updated 11:46, Friday, 22 August 2008

SPLASHING out on a brand new summer or autumn wardrobe may cost shoppers far more than they had initially expected.

For the one in four people (24 per cent) in the UK who own a store card can expect to pay on average 26 per cent interest on their purchases, making them more than three times more expensive than a competitive personal loan.

While the temptation to make an initial saving on purchases in-store can result in customers opening up a seemingly harmless store card, high interest rates mean that the millions of cards in use across the UK could turn out to be a very expensive ‘money-saving’ option.

Mark Boyle, personal loans manager at Alliance & Leicester, which carried out the research, said: “Summer is as good a time as any to sit down and reassess your finances.

“Whether you are saving for a family holiday, or to free up some cash to make home improvements, it is good to take stock of outstanding debts. For those who wish to make their debt easier to manage, taking out a personal loan and consolidating it into one easy to manage chunk may be a wise option.

“With the same day funds option, the loan is paid into your current account within a matter of hours – thus enabling borrowers to use the funds with immediate effect.

“And with one of the best rates available on the high street, our personal loans aim to meet the needs and budgets of virtually everyone.”

Samantha Owens, of Moneyfacts, said: “For those with debts already on a store card, it is wise to move it somewhere cheaper, with a more affordable rate of interest. Taking out a personal loan may be a good choice for those who find that debt has caught up with them.

“Personal loan rates can be much lower than store cards and with the regular fixed repayments, the loan is split into more manageable chunks, which is easier for borrowers to pay back.”