March 6, 2006

The Competition Commission will announce tomorrow that store cards with an APR over 25 per cent must display a warning on their monthly statement.

There are currently around 70 groups in the UK who provide store cards and most have an average APR of 30 per cent. Last year it was found that the store card sector was uncompetitive and charged extremely high interest rates.

The idea behind the prominent warning for APR rates over 25% is to remind consumers of the high APR they are paying and to perhaps encourage them to seek a better credit card deal elsewhere. It also expected that many companies offering a store card will reduce their interest rate below the 25 per cent threshold in order to not have to display the warning, again this would have a positive effect.

Payment protection insurance is also in the sights of the Competition Commission; PPI was previously sold as part of the store card package. Payment protection insurance forced on the consumer was normally much higher and did not allow the store card holder to shop around for a more competitive quote.

Other measures being ordered by the Competition Commission include details on estimated interest if only minimum payments on the store card balance are made and a “wealth warning” for consumers who only ever pay the minimum balance.

Consumers are attracted to store cards at a point of sale; the offer usually includes a 10 per cent discount on any goods purchased on the day the account is opened. Many people do not realize the excessive APR’s that are applied to their store card.

We at creditcards-gb have always been against the use of store cards due to their high interest rates, however, we do believe that the 10% discount offered can sometimes work in a consumers favour, especially if they are financially prudent and that the purchase justifies the opening of a store card to gain the benefit of the 10 per cent discount.

We welcome any move to give consumers more information and let them be aware of what exactly they are signing up for.

We recently added a small article to our site outlining the advantages and disadvantages of using a store card. Click here for more information Store Cards Good Or Bad - You Decide!