Store Cards

You are probably aware that most large retail stores now offer credit to their customers. You can have a credit account with these large retailers if you have a good income and a credit rating. You will be issued with a card like a credit card and you will be able to buy now and pay later.

In most cases, you are not borrowing from the store but you are borrowing from a finance company. If you are considering getting one of these cards, make sure you check the interest rate with other forms of borrowing. In some cases, you will find that theses store cards are charging a much higher interest rate than other forms of credit cards.

You have probably seen advertising for interest-free periods with some of these stores. Be careful of these offers and read the terms and conditions carefully. You will probably find that there will be some fee to pay.

Example: If the offer is for 12 months interest-free and you have not paid the full amount within that time, you will often be hit for the full interest bill, backdated to the date of the purchase, plus ongoing interest charges until the purchase is paid in full.

Example: You have purchased furniture from a department store on June 1 2005. The furniture costs $1000.00, with no payments necessary and an interest-free period of 12 months in total. The interest you will have to pay is 25% if you haven't paid in full before the 12 months have passed.

It is now May 31 2006 and you still owe the full amount of: $1000.00. On June 1 2006, you now automatically owe $1,250.00 and this interest will compound each month. You will ALWAYS be paying the interest each month, until the furniture is completely paid off!

Even if you only have to pay a fee to delay the payment, you will still be paying more than the ticket price for your purchase. You will also find it's more likely than not that your purchase is still attracting interest, at a high rate, during the period that you are making 'no further payment' and the interest goes onto the bill at the end of the offer.

Many large stores offer credit cards. You are not always getting credit direct from the store, but rather, from a finance company. Check the interest rate of the store credit card and compare it to other credit cards. Store credit cards are usually a much higher interest rate than regular credit cards!

Don't get stuck with high interest repayments! Read the terms and conditions carefully before signing up for 'interest-free' offers

Interest-free offers can be a useful way to purchase large goods like white goods or furniture, but only if you pay off the items completely within the allowed time period.