The store cards that charge you over 50%
DAILY MAIL - 14TH JANUARY 2004
Store Cards are squeezing even more money out of their customers by selling them expensive – and often useless – insurance which can push interest rates up to over 50%.
Shoppers who splashed out at Christmas using these overpriced cards face a New Year ringing up interest if they don’t clear their debt in full.
The true cost of the interest is often disguised because the monthly rate is highlighted and this appears to be much lower.
But many store cards charge as much as 30% interest, and as the insurance sold with the card can cost as much as 1.5% of the debt every month, this can push the annual interest rate up to 56%, according to data specialists CreditCheck, part of Mortgagecheck.
That is almost 15 times more than the base rate and is charged by stores such as Laura Ashley and Country Casuals whose cards are run by GE Consumer Finance, the biggest provider of store cards.
There are nearly 22 million store cards in Britain and around £4.8 billion was spent on them in 2002. The average interest rate is 27% - this compares to an average of 15% on credit cards from major banks.
Retailers have been criticized by the Treasury Select Committee – which is looking into credit card practice – for their underhand tactics in promoting their cards without revealing the true cost to the customer.
The committee was horrified to hear that staff in stores were refusing to allow customers to take away the application form so that they could study the terms and conditions.
Staff usually fill in the application in the store, often with the box for insurance already ticked, and simply ask the customer to sign that they want the insurance, Most of the cards issued by GE Consumer Finance, including those of House of Fraser, Debenhams and Top Shop, charge £1.50 per £100 owed on their cards for insurance called Account Cover.
Payment protection insurance pays your monthly card bill if you lose your job, or if you can’t work because of sickness or accident.
But GE’s policy also covers your purchases against damage, and if the store reduces the price of items you have bought within the next 100 days you’ll be given the difference in the price – both perks which are offered free by credit cards such as Barclaycard.
The two cheapest store cards are from Marks & Spencer, which charges 18.9% and 0.75% for insurance bring the total down to 29.8% and John Lewis, which has a APR of 13% and doesn’t sell payment protection insurance.
GE has promised to improve the information it supplies to customers on APR’s and other charges on it cards following the select committee’s criticisms. GE last reduced the rate on its store cards in April 1999. Since then, the base rate has fallen from 5.25% to 3.75%.
Simon Burgess of insurance broker Burgesses says: “Stores take a huge commission on payment protection insurance but it’s not worth the paper it’s written on. If you do make a claim, the insurance often only pays the minimum monthly payment – not the whole balance.
