Debt Basics

You're queuing up at the checkout, weighed down with purchases, and the smiling assistant behind the till offers you a 10% discount on everything - if only you'll sign up to use the shop's handy store card...

It's a trap many shoppers have fallen into, but store cards are rarely good news. Despite the range of tempting offers and convenience they offer, store cards also come with a sting in the tail - an annual percentage rate (APR) of anything up to 30% on your purchases.

We live in a credit culture these days and everyone takes advantage of a credit facility from time to time, even if it is only to buy a cinema ticket or pay for a small bill in a shop.

Although most people can control themselves, it is easy for things to spiral out of control. Buying things on the "never never" used to be looked down upon - but nowadays the "buy now, pay later" mentality is widespread - and considered acceptable.

Because people use credit so much, it is vital that they should be aware of their rights and responsibilities. But many aren't, and often assume - wrongly - that there is little they can do about their credit card and hire purchase agreements.

As the use of plastic rather than cash becomes increasingly widespread, shoppers are comfortable with the idea of using credit to boost their buying power. Store cards don't pose a problem if you are disciplined enough to pay off the balance within the interest-free period (typically between 35 and 55 days). But, if you can't pay the outstanding balance each month, the interest due on the unpaid debt can soon mount up.

Charges vary between retailers (the worst rates hit 30% but some of the lower ones are just 13%) so always check carefully before signing up. Remember that you can find credit cards that have an interest rate of 18% or less and they may be a much better bet for spending in stores.

Store cards are regulated under the Consumer Credit Card Act, which sets out rules for any loan under £25,000, and a government taskforce is currently examining whether further legislation is needed to control the providers.