2005-09-16

Money & Intolerance: Store cards are a Rip Off!

Store card companies are overcharging customers by up to 100_million_GBP/year by hitting them with unacceptably high interest rates, according to the competition watchdog. 'The Competition Commission' ('The CC') says interest rates are 10 per cent to 20 per cent higher than they would be if they reflected the providers' costs. Eleven major store cards, including 'MK One' and 'USC', had an annual percentage rate (APR) of 30.9 per cent, while another 26 stores, including 'BHS', 'Debenhams' and 'Top Shop' charge 29.9 per cent. 'The CC' found that many consumers were unaware of exactly what they were signing up for. It called on the companies to put warning notices on card statements to draw attention to the high interest rates they are charging, as well as information on the cost of any related insurance they have sold. 'The CC's' deputy Chairman, Mr.Christopher Clarke, said there is little competitive pressure between retailers, resulting in rates clustering at a high level.
'Retailers' primary concern is to avoid having an APR on their store card which is above those of other store cards,' he said. 'At the same time, consumers' sensitivity to APR levels and other charges is low. 'Taken together, this results in store card holders who take up credit, and associated insurance, paying more than they would in a fully competitive market.'
Among the other main remedies suggested by 'The CC' are ensuring that full information is always available on statements, that potential savings which could be made through paying by direct debit are well promoted, and that insurance elements are offered separately. Mr.Nick White, the head of personal finance at the price comparison service Uswitch.com, welcomed the findings of the inquiry and added that an official body like 'The CC' might be able to make improvements. A major part of the problem, he said, was that 58 of the 70 store cards on offer to consumers are provided by only four major store card issuers.
'It is hardly surprising, given that they have got used to such big revenue streams, that there is no downward pressure on the level of interest on store cards,' he said.
'In effect, they would be competing with themselves if they did compete on APRs.'
While paying off the bill at the end of the month is a means of enjoying the benefits of the store card without any interest being applied, 'The CC' found more than half of all store cardholders (57 per cent) took on interest-bearing credit. But Mr.Stuart Glendinning, managing director of the personal finance advice website Moneysupermarket.com, said that a protectionist stance should not be adopted towards personal finance by government.
'There has never been as much competition in personal finance,' he said.
'It has never been easier to shop around and there has never been so much information about personal finance in newspapers and on the internet.'
Mr.Ashley Holmes, head of legal affairs at 'The Finance and Leasing Association', whose members include all the major store card providers, said APRs are reducing, and added:
'Store cards are still an attractive credit option to many consumers, since they enjoy the extra services and personalised discounts that come with the cards.'
THE WORST OFFENDERS The 11 stores offer store cards with an APR of 30.9 per cent are:
  • Baronjon
  • Brantano
  • Designer Room
  • Faith Card
  • Icon
  • JJB Sports
  • MK One
  • Pilot
  • Quiz
  • TJ Hughes
  • USC
'Store card holders overcharged by £100m ', MICHAEL BLACKLEY, The Scotsman, 2005-09-15, Th

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