Living within your means is the key to staying out of debt but it is extremely easy to become tempted by a purchase you cannot necessarily afford. Store cards are very easy to obtain and can be useful if you would prefer to pay something over a longer period of time. However, they can also be abused and, under these circumstances, the level of debt can be substantial. Here are some of the reasons why store cards can easily lead to personal debt.
Store cards are easy to obtain
Store cards are not to be confused with loyalty cards which merely gather points and can contribute to a future purchase. Store cards are different in that they are often offered freely to anyone and they allow customers to make a purchase which can be paid for later. However, interest gathers should the balance not be paid in full. They are similar to credit cards but different in that they can only be used within one store and they have much higher rates of interest. The danger with this kind of card is that they can literally be given to anyone. This includes young people who are in more danger of racking up debt. Often, the terms and conditions of the card are not discussed between the customer service advisor and the customer meaning that many are naïve to the level of debt they could rack up.
Store cards have high interest rates
Credit cards have lower interest rates than store cards which can often charge around 25% in interest. Although they often come with an introductory discount, the amount of interest added on to this over time makes the discount less than worth it. This is only if it is not paid off in full straight away but many people often make purchases without thinking it through or thinking about whether they will be able to afford the payment before interest is added. The best way to avoid high interest charges is to pay off the card in full before it is added or just avoid making the purchases you cannot afford.
Store cards affect your credit rating
Personal debt such as that you may rack up with a store card can affect your chances of obtaining credit in the future. Racking up huge amounts of debt or making late payments to a store card can adversely affect your chances of obtaining more important credit such as a loan or a mortgage. Store cards don’t often require any credit to obtain them in the first place therefore, if you are already in bad credit, you can hurt it even more by even applying for this kind of card.
Struggling with debt can be a stressful experience, especially if you try to handle it alone. To avoid bankruptcy or even just to regain control of your debts, it is always a good idea to obtain some financial advice. If you are struggling with debt from store cards, credit cards, catalogues or unsecured loans, contact us here at Dissolve Debt for some impartial, no obligation advice.