Personal loan 'better value' than store cards

Consumers are being encouraged to take out store cards without understanding how they work or whether a personal loan or other means of finance would be better value.

Chris Tapp, deputy director of Credit Action, said that the way in which store cards are marketed means that people use them to run up debts without enough thought.

In-store promotional material and on-the-spot discounts mean that customers "pick them up without really thinking through whether the store card is value for or how the store card works".

He added: "If they continue to use the store card it is easy to see how people will run up debts doing that and not realising that store cards are quite an expensive way to borrow."

When compared to a credit card or personal loan, store cards can prove to cost a lot more in the long term, Mr Tapp said, as they often carry a far higher APR. "So they will be slightly more expensive than credit cards and certainly far more expensive than something like an overdraft or a loan," he said.

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