12 December 2006
Consumers are being warned not to fall into retailers' traps by succumbing to attractive store cards, which rarely offer value for money and can end up costing consumers more in the long run.
The Office of Fair Trading (OFT) and the Competition Commission (CC), have recently concluded that store cards are not operating in customers' best interest, largely due to lack of competition.
With no regulations to protect consumers expected until May 2007, the watchdogs are concerned that many consumers may be enticed by the lure of store cards without realising what they are letting themselves in for.
Interest-free offers appear to make financial sense but the small print could reveal an astronomical APR rate, leaving consumers at risk of falling into debt.
According to a report in the Scotsman, Argos' store card offers a "pay nothing for three months when you spend £95" deal, but its APR starts at 25.9% and late payments will cost an additional £17.50.
John Lewis fares better, with a charge of 15.9% APR. In addition, consumers are rewarded with points which build into vouchers for use in John Lewis and Waitrose.
The OFT advises shoppers to check all details of the agreement thoroughly, compare it with other ways to help spread payments, beware of pushy sales staff and to talk to the lender as soon as possible if they find themselves in financial problems.