- 13
- Aug
Consumers hitting the shops this summer have been warned that making purchases on uncompetitive store cards could see them paying considerably more than the sale price.
According to Alliance & Leicester, shoppers should make ditching store cards a priority in an effort to save money in difficult economic circumstances. The financial services provider pointed out that the average store card offers an annual percentage repayment (APR) rate of 26 per cent on purchases, which was said to be more than three times higher than the most competitive cheap loan. And with nearly a quarter (24 per cent) of Britons owning a store card, Alliance & Leicester warned that significant numbers of people may find themselves getting stung during the summer spending season.
It noted that while many people may be tempted to make an initial saving by using this type of card in-store - perhaps to pay for a new summer outfit - the average APR can mean that the attempt to save money in this way can in fact end up costing consumers dearly.
For those who are considering ways to make major purchases in the coming months, taking out a cheap loan may prove a more effective option, Alliance & Leicester indicated. As well as offering cash for new outfits or other high street purchases, Alliance & Leicester pointed out that personal loans can be used to fund major structural improvements to the home or buy a new vehicle.
It went on to add that for those who have previously lost out on store cards and have amassed large amounts of debt as a result, taking out a low-rate loan for the purposes of debt consolidation may also prove a prudent course of action.
“Summer is as good a time as any to sit down and reassess your finances. Whether you are saving for a family holiday, or [looking] to free up some cash to make home improvements, it is good to take stock of outstanding debts. For those who wish to make their debt easier to manage, taking out a personal loan and consolidating it into one easy to manage chunk may be a wise option,” commented Mark Boyle, personal loans manager at the group.
Meanwhile, Samantha Owen, representative for independent adviser Moneyfacts, reminded people that despite the temptation to spend big during the summer months, paying for items on store cards can leave people exposed to some of the highest repayment rates around.
“For those with debts already on a store card, it is wise to move it somewhere cheaper, with a more affordable rate of interest,” she continued, identifying personal loans as a possible option. Ms Owen concluded by indicating that with repayments split into more manageable chunks, people may find that a low-rate loan allows them to pay off their existing debts more effectively.
Alliance & Leicester’s announcement follows research from Apacs in which it was indicated that 21 million Britons are now banking online in an effort to organise their finances, compared to 3.5 million in 2000.
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