Store Card Debt: Advice and Help if in Debt or Arrears

A store card is a credit card or a finance agreement that you can use in purchasing items or goods in shops. It can be utilized to pay goods on credit and pay them later in one go or through instalments. Usually, you’ll be charged interest if you chose to pay through instalments. The interest rate is frequently higher your credit card.

What are the features of store cards?

Most store card offer incentives for signing up. This can be a discount on your first purchase using the card, promo codes, and other special offers or perks.

This can look enticing. However, this can mislead you as the interest rates of most store cards usually range from 20-30% APR or more. This can be higher as compared to your credit cards.

The only way for you to save money on these purchases is to pay off the balance right away. If you spread the costs through monthly instalments, you can end up paying more.

Some of the disadvantages of store cards are as follows:

  • It can be enticing to make purchases and accumulate debts that you cannot afford to pay in full at the end of the month
  • It’s possible that you’ll end up using your store cards rather than finding for cheaper buys and best deals
  • Though store cards may startup with a minimum credit limit, this can increase as you use the card that could make it more difficult to repay due to higher chances of spending beyond your means
  • Store cards are mostly offered in shops, but the staff may have limited knowledge on the interest charges, minimum payments and other costs

How much is the minimum payment of store cards?

You need to pay the minimum amount each month that is usually higher than the monthly interest charged. This means, paying the minimum amount on your store card will take you longer to pay off your debt. Therefore, you should pay more than the minimum amount if you can afford to do so.

Store Cards and Persistent Debt 

When making minimum payments on your store cards over the last 18 months can result in persistent debt.

Store card providers are designated by the FCA to contact you in case you have been on persistent debt. Persistent debt can be based on the following circumstances:

After 18 months of persistent debt

Making minimum payments for the past 18 months means paying more on interest and charges rather than towards your balance. Your provider will notify you once this happens and request to make higher payments.

After 27 months

Your store card provider will notify you when your account is still on persistent debt. They’ll encourage you to pay more than the minimum to reduce the balance rather than just paying the interest and charges.

After 36 months

If your account is still on persistent debt, your provider might arrange terms where you can pay it within three to four years. They may recommend:

  • affordable payment plan to pay off the debt faster
  • use a credit product such as a loan to pay off the full amount

If these options are not feasible, they may consider freezing interest and charges or lowering your minimum payment. This may include suspending your account that can impact your credit file.

What happens if I have arrears on store cards?

Once you don’t pay the minimum payment each month, your account will be in arrears. This can rip you even more as interest can be added each time you missed payments. This is usually around £12 for each missed payments.

You will be contacted by your provider to collect payments. If you fail to settle the arrears, your account will default. When this happens, your store card provider can take steps to recover the debt.

For further information you can check our guide on: What Creditors Can Do to Reclaim Debt?

Available Help and Advice on Store Cards

If you’re missing payments on your store cards, it’s a sign that you need debt help and advice. You can use our online advice tool or call us. We have debt experts that can determine the best alternative and solution whatever your circumstances are.

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