Wake up to storecard peril
THE OFFICE of Fair Trading will today unveil a campaign aimed at raising awareness about store cards. The Government-backed consumer watchdog confirmed in March that it had asked the Competition Commission to investigate the industry.
A This Is Money campaign has long fought to increase awareness of 'rip-off' store cards. Some of Britain‘s biggest High Street stores typically charge customers annual interest of between 28% and 32%. This compares with an average credit card rate of around 17%.
John Vickers, chairman of the OFT, a Government-backed consumer watchdog, will outline the campaign. It will also reveal a new credit-card sized leaflet, Are you store card smart?, which has been designed to alert consumers that a store card is a 'serious credit commitment' and to highlight the key questions consumers should be asking.
Other consumer groups have grown equally concerned about the sky-high rates charged by store cards and the dubious techniques used by shops to lure potential customers. For example, many offer discounts of 5% and 10% on prices at the counter if a customer takes a card, leaving them little time to think about it.
'The OFT‘s consumer store card campaign is very timely,' said Claire Whyley, deputy director of policy at the National Consumer Council. 'It comes at a time when interest rates are predicted to rise, and fears are growing that some people are taking on more credit than they can handle.
'We welcome any information that helps to ensure consumers understand the complexities and pitfalls of store cards, before they take on serious credit commitments.'
The NCC said it would like to see the OFT‘s leaflet handed out in stores.
Recent research from Sainsbury‘s Bank claimed Britons could collectively save £350m a year by transferring outstanding debt from high interest rate store cards to more competitive credit cards. It said about 12.2m people in the UK have store cards, but of these only 53% clear their balance every month.
The research found that an estimated 565,000 people have balances of more than £1,000 left on their cards at the end of each month, while 92,000 have balances of more than £5,000.
