12 June 2007
Creation Financial Services, who supply store cards to a number of high street chains including shoe shop Faith, Woolworths and the Carphone Warehouse, has sent out a number of £250 cheques to its store card holders.
The cheques are already made out in the card holder's name and offer the user the chance to "use the money to start decorating your garden with decking, BBQs and even furniture" or "even book a holiday", but the repayment rates are sky-high.
Highlighted by the Observer after one of its journalists received the cheque, the small print says that the cheque will be charged to your store-card account, incurring interest of 30.9% APR - or 27.8% for direct debit payments - plus and additional 2% handling fee.
The use of such store card cheques has been questioned in financial circles recently, not least within the Financial and Leasing Association (FLA), which has already declared that providers should not send you a cheque with the amounts already filled in unless you have asked for it.
Creation insisted to the newspaper that all customers who received the cheque had been credit-sourced first to check their financial eligibility for the cheques and insisted that there was no compulsion for consumers to cash them.
A Competition Commission spokesperson did not take so lightly with the new store card cheques, telling the Observer: "This is a relatively new tactic which aims to encourage people to use their store card more."
They added: "Cardholders should be aware that the rates on them are generally higher than those for other forms of credit."
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