Store card promoters thumb suck rates and charges
Store card promoters will be keen on pushing the benefits of store cards in the run up to Christmas but some aren’t nearly as clued up about interest rate charges or what people could expect in penalties if they miss a payment, Moneybags has found.
In a trawl of ten Cape Town fashion retail stores that offer store cards, no shop assistants could correctly answer all the questions put to them by Moneybags about important details like interest rates and late payment charges. Although most staff gave details of the benefits, and some even pointed to the discount vouchers on offer for opening an account, only three out of the ten consultants asked knew what the correct interest rate was that would be charged on store cards. None could say what the charge would be if a payment was missed.
For example, a Stuttafords consultant couldn’t tell Moneybags what the interest rate or late payment charges were for its Gold card and while a Woolworths employee working in the financial services department correctly stated the interest charges she wasn’t sure what the company charged for late payments or on an overdue account.
Angelique Ruzicka, personal finance editor at Moneybags, who conducted the survey said: “So, if you manage to buy your Christmas presents without getting the hard sell on a store card, then you are lucky. Store accounts are an expensive way to borrow and if the staff promoting them don’t know how much interest you are charged or what charges get laid on for late or missed payments, we wonder how many people who’ve been persuaded into taking them out realise they’re being charged exorbitant rates.”
Ruzicka added: “Some consultants provided us with a figure but these were inaccurate and sometimes higher or lower than the actual rate that we were told about when we called each of the stores’ customer care centres or PR departments.
Be disciplined and store cards could work for you
Store cards are expensive and you could soon end up in much debt if you don’t handle them with care. Our advice would be to avoid them but if you can’t resist, here is what you should do to avoid getting yourself into debt:
1. Find out if your store card has an interest free period: Some providers don’t charge you interest for 55 days provided you pay off your card in full before the interest free cut off period. Others have six month revolving plans that don’t charge you interest on your balances. But if you don’t pay your outstanding amount off within six months then you could be charged interest.
2. Don’t be bullied: Some store card promoters may want you to sign up for an account then and there. Don’t make any rash decisions. You should instead take any literature about the store card with you and peruse the terms and conditions in the comfort of your own home.
3. Use your credit card instead: Store cards are expensive compared to other lines of credit such as credit cards. If you are going to take on credit rather take on a credit card from a bank than a store card. Interest charges on a credit card can be much lower than what store cards charge. But, like store cards, credit cards also only work for you if you pay them off in full and if you are disciplined.
4. Find out what you are going to be charged: Find out what the interest rate for your store card is and what the penalty charges would be if you paid late. Better yet, get it all confirmed in writing.
5. Don’t be drawn by the ‘carrots’: In-store promoters may highlight deals such as ‘R500 off your next purchase if you sign up now’. But don’t be tempted, especially if you don’t deal with credit well. With the average store card charging 21%, rather walk away or pay for your purchases in cash.
Store card rates:
Following on from this, Moneybags verified the rates with stores’ customer call centres or communications departments and compared them to responses received from store promoters. We were quoted the following rates from call centres or PR departments:
Table notes: Interest rates listed are generally charged on 12, 18 or 24 month accounts. For most stores, six month revolving plans are interest free unless instalments are paid short, late or missed. Correct as at 13 December 2012.