The proposals by the government have been met with mixed reactions in some parts, and were put forward to the Department for Business Innovation and Skills. The moves have been welcomed by Nationwide, which said that the crackdown would prove beneficial for consumers.

One of the areas of the proposals that have been welcomed by Nationwide as well as many other industry officials is that if the proposals go through lenders will have to allocate monthly repayments from consumers to the most expensive debt on the cards first and then move on to the lower interest debt.

In most cases the allocation of repayments works the other way around at present, which means that consumers end up paying far more interest to the lender.

An official from the Nationwide said: “We are delighted that BIS have included order of payments in the review. We think all UK credit card providers should allocate payments in a positive way. The US has already recognised that the practice of paying the cheapest debt first is unfair to customers and is forcing lenders to be more consumer friendly.”

One of the areas that has received some degree of scepticism from some industry groups is the proposal that minimum repayments need to be increased by lenders.

Whilst this could mean that the debt is cleared far more quickly and a lot less interest is paid by the borrower some are concerned that in the current climate many credit card borrowers may not be able to afford to step up their minimum repayments due to financial constraints.

Credit and store card crackdown welcomed by Nationwide is a post from: Credit Cards Web

Whilst consumers expect to be charged interest for having a negative balance on their store cards many will be shocked to learn that they will not be charged for having a positive balance on the card.

Those that will be affected are people that have store cards run by the Spanish bank Santander, which also owns Abbey.

Amongst the retailers that have Santander store cards are Mothercare, Debenhams, Topshop, Dorothy Perkins, and House of Fraser amongst others. The charges will work by applying a fee of ten pounds onto the cards of customers that are in credit for more than three months with their store cards.

Previously the only customers that were penalised with those that had outstanding balances on their store cards, and were made to pay punishingly high interest rates of around 30 percent.

However, many shoppers build up credit on their store cards by taking items back and having refunds put on the card, and if they do not spend this credit within three months they will be charged.

One industry official said that consumers need to be mindful of this new measure, and those that have store cards may want to consider switching to a credit card instead to avoid these fees.

He said: “If you have debts on a store card, transfer them to a 0% credit card instead.”

In the meantime Santander officials have said that they will always write to the consumer first before applying any sort of penalty so that customers know the situation.

Customers with credit on store cards to be penalised is a post from: Credit Cards Web

Credit Cards

So, what do credit cards have to offer? Depending on which credit card type and company you go for the offers are variable. Most APR’s are typically between 11% and 16% although if you have a poor credit history the APR can go up as high as 30%. Many companies offer introductory rates at the beginning of your contract which could be 0% on purchases for the first six months or a 0% balance transfer if you are changing your card to another company. There are also reward cards where you can save points to exchange for vouchers or cards that offer cash back or air miles.

Store Cards

What do store cards have to offer? Store cards have a wide range of APR from around 13% to 29% depending on which company you have your card with. There are some companies which have introductory offers with most stores offering 10% off goods when you take out a store card with them and Argos who offer you six months buy now pay later when you spend £195 or more. Some stores can also offer you free catalogues or magazines of the company. Store cards also offer reward loyalty schemes with cash back to spend in-store.

My Conclusion

Store cards more often than not have a higher APR than the traditional credit cards and you can only use a store card at whichever retailer you got your card from, but with credit cards you have a much wider choice of shops, restaurants or petrol stations etc for which to use your card.

You can change from one credit card to another with your existing balance, with offers of 0% balance transfers the industry have made this become a very easy transition to make. You cannot move your balance from one store card to another. Both cards offer roundabout a 56 day interest free period. Both store cards and credit cards offer you loyalty schemes so it would be whichever was more beneficial to you although research has found that 25% of people with a store loyalty card do not claim back their benefits.

All in all, my view is that credit cards give you more freedom to spend when and where you like and isn’t as expensive as having credit on a store card.

Credit Card Vs Store Card is a post from: Credit Cards Web

A value of £1.5 billion has been placed on the business according to reports, and following the investigation GE may decide to sell this sector. In a similar move last year GE decided to look for a buyer for its American store card division, after the effects of the credit crunch in the United States wreaked havoc in the financial sectors.

Reports have indicated that there are a number of reasons behind GE toying with the idea of pulling out of the market, where it currently holds the number one position. One of these reasons is the high level of consumer debt in the UK, with the effects of the global credit crunch making matters even worse.

Another reason is the high level of criticism that store cards have been receiving, as they have been slated for the high levels of interest charged on outstanding balances, and have been accused of driving consumers into serious debt and contributing to the high debt levels in the UK.

Many consumers find themselves in serious debt as a result of credit and store cards, which are known for their very high interest rates, and many experts have blamed a large portion of the UK’s debt mountain on these cards.

GE toys with dropping out of store card market is a post from: Credit Cards Web

Many people have found themselves experiencing spiralling debt problems as a result of credit and store cards, and indeed these cards have been highlighted as one of the main sources of the personal debt mountain in the UK. For some people the cycle of credit card debt just never ends, because as soon as they start to make a dent in the balance on the card or use a 0% balance transfer deal to clear the debt they go off and spend on it again, knocking the balance back to the original amount.

Credit cards, and in particular store cards, are well known for the high rates of interest that are charged on the outstanding balance, and for those that make only minimum repayments on the cards the amount of interest paid on the balance can be shocking. It can also take years, or even decades, for some cardholders to repay their balances. This is why credit cards are simply not suitable for those that have little willpower when it comes to spending and making repayments.

If you have credit and store cards on which you have balances, on which you are being charged high rates of interest, and on which you can only afford to make minimum repayments then it may be worth looking at an alternative to help you to get rid of your expensive cards and reduce the risk of further debt. Remember, although credit cards are convenient, enabling you to make cashless transactions, debit cards also offer the same convenience. The only difference is that you will be spending our own money when you use a debit card, so you won’t be accruing any debt.

Debt consolidation is a solution that can be effective for anyone that wants to get rid of costly credit and store cards, as you can use a low rate consolidation loan to pay off all of your cards. This means that you will no longer be paying the extortionate rate of interest charged on many of these cards, you will not have to worry about dealing with your credit card debt for decades, and best of all you will no longer have the means to spend money that you do not have via these cards. However, it is important that you bear a few things in mind when considering debt consolidation.

Firstly, you need to ensure that you find a low rate consolidation loan that is going to save you money in interest over the long term, is not taken out over too long a period (otherwise you will still face years of debt), and offers affordable monthly repayments. You must also make sure that once your cards have been paid off you contact the providers and have the accounts closed, as otherwise you will most likely end up spending on the cards again and ending up in an even worse financial situation than before.

Get rid of your credit cards and store cards is a post from: Credit Cards Web

GE Money is now said to be conducting a review of the UK store card market in order to assess whether or not it should remain part of the market, where it currently holds the number one position. The company currently operates cards for a number of household retailers, and this includes Debenhams, TopShop, Dorothy Perkins, House of Fraser, and many others. The current market value of the business is £1.5 billion according to reports, and according to the conclusion drawn following the market review the business may have to be sold.

The store card market has always been at the centre of controversy as a result of the extortionate interest rates applied to accounts where customers spread the balance. This has resulted in widespread criticism of store cards, and this is said to have also contributed to GE Money’s decision to review whether or not it wishes to stay in the market.

GE also decided to look for buyers for its American store card division last year, with the widespread credit crunch creating difficulties throughout the United States when it came to the credit markets. The effects of the credit crunch have resulted in higher inter-bank lending fees, and this has made it difficult for lenders to extend credit to new consumers due to the risks involved.

GE Money reviews UK store card market viability is a post from: Credit Cards Web

The first thing you should decide is if you need another card. Do you already have multiple credit cards? Are the balances on your existing cards high, and are you having trouble paying them off? If the answer to either of these questions is yes, this may be a sign that you should avoid the store credit card. In addition to this, signing up for store credit cards can have a negative effect on your credit score. While applying for one store credit card may not be a problem, doing this too many times can substantially lower your score.

Another problem with these credit cards is that they are very tempting to use. While you may temporarily have an increased amount of purchasing ability, the money you borrow will have to be paid back, often with interest. Retail stores don’t care about your personal finances, and are only concerned with getting you to spend as much money as possible. Many people don’t realize that store credit cards could carry interest rates which are 40% higher than standard credit cards. If you generate a large enough balance, you may be in debt for years, long after the merchandise you’ve purchased has worn out.

Another problem with store credit cards is that they can only be used with the store chain which issued them to you. This means they are not flexible, and will not be accepted at most places. Even if you only plan on using the credit card in order to get a discount, having too many accounts can make you a risk to lenders. Because of universal default, the interest rate on your other credit cards could be increased if applying for the store credit card has a negative impact on your credit score.

It is important to realize that store credit cards benefit the stores more than the consumers. The interest rates are high, and you are forced to shop there. Applying for these cards could also have a negative impact on your credit report or score. You should weigh your options carefully when you’re thinking about getting these cards.

What You Should Know About Store Credit Cards is a post from: Credit Cards Web