Slash 10% off, then give store cards the chop

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The Independent Online

Sales assistants flogging store cards have always known how and when to attack: just waft a tempting 10 per cent discount under the noses of customers when they're about to make a purchase.

Before they know it, they've been reeled in and persuaded to sign up on the spot, with no idea of the card's terms or annual percentage rate (APR).

Unfortunately, store cards are one of the most expensive ways to borrow, with APRs as high as 30 per cent or more - twice the typical APR on a credit card and more than six times the Bank of England base rate (currently 4.5 per cent).

Happily, new figures suggest that we're becoming immune to their charms.

While a record £436.5bn was spent on payment cards last year, store cards were the only type of plastic to see a fall in popularity, according to a new report from Datamonitor, the financial analyst.

Spending on debit and credit cards was up on the previous 12 months, by 17 per cent and 9 per cent, respectively, but consumer spending on store cards slumped by 17 per cent, to £4.3bn.

At last, it seems, we're slowly wising up, says the report's author, Kieran Hines. "If you compare store cards to credit cards, the basic proposition is less compelling. The APRs are higher, the borrowing limits are lower, and they can only be used in a restricted number of outlets," he says.

Retailers such as Marks & Spencer have also been switching active store-card customers over to credit cards, as they are likely to use these more, he adds.

Among the few retailers who don't impose sky-high APRs are Ikea (12.9) and John Lewis (14).

At the other end of the scale, flagrant offenders include the Creation account card (used in stores such as HMV and Selfridges) with an eye-watering APR of 30.9.

Country Casuals store card levies an APR of 30.7, followed closely by Dorothy Perkins, Laura Ashley and Toys "R" Us - all at 29.9.

While you can steer clear of these punitive rates by paying off the whole of your balance on your card each month, not enough of us do so.

If you want to sign up for a store card to take advantage of the initial discount, make sure you cut it up immediately afterwards. Then move your debts on to an ordinary credit card offering a 0 per cent balance transfer, such as Virgin Money.

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