Don't use these store cards

If there's one thing that really drives me mad at Christmas, it's going into a shop, queuing to make a purchase and then being asked if I'd like to save 10% today by opening up a store card. It's not just on the odd occasion either - it seems to happen ALL THE TIME, especially at this time of year.

Certain shops are particularly guilty of this - with some stores even broadcasting the wonders of their cards over the tannoy to try and attract more custom.

But while the benefits of these cards are made perfectly obvious, there's one thing that's always casually skipped over - and that's the eye-popping rate of interest these cards charge.

The sting in the tail

If you're ever offered a store card - and believe me, you will be if you shop in a department store this month - I'd suggest asking the sales person exactly what the APR is, because chances are he or she won't even know.

But I can tell you that the APR on store cards can be as high as 29.9% - that's almost twice the rate of a normal credit card! Given that the Bank of England base rate is currently sat at just 0.5%, this is completely ludicrous!

In fact, to give you a better idea of what's on offer, here's an alphabetical list of some of the worst offending store cards:

Source: Moneyfacts

Looking at this chart, it's pretty obvious that these APRs are horrendously high. But the trouble is, it can be far too easy to overlook the APR when you're being offered rewards such as 10% or 20% off, regular money-saving vouchers, and exclusive cardholder evenings. And because you'll often get one of these rewards there and then, as you make your purchase, it's even more tempting to simply sign up for the card.

But if you do sign up for a card and later realise you can only afford to pay the minimum monthly repayment (MMR) each month, it will take you a long time to clear your balance - and, during that time, you'll be paying out a LOT in interest.

This is likely to far outweigh any discount deal you've received initially. Remember you get a 10% discount, but will have to pay almost 30% interest on your debt over 12 months. Easy to see now why the store offered you that discount in the first place!

Double the pain

If high APRs haven't yet put you off these evil cards, then watch out because certain store cards have just got even worse! Now, not only will you lose out if you're in debt on your card, but you'll also be penalised if you're in credit!

Nowadays, Santander Cards, which runs store cards for Topshop, Harvey Nichols, Burton, Dorothy Perkins, Mothercare, House of Fraser, Wallis, Miss Selfridge, Evans and Debenhams (to name a few) will charge a 'dormancy fee' of up to £10 if you are in credit for three consecutive months! Find out more here.

This means that if you make a purchase, but later return it and don't buy anything else, you'll be hit with a fee if you don't spend that credit on anything else within three months.

If you ask me, this is simply outrageous! It's one thing to be charged for being in debt, but to be charged for being in credit is completely ridiculous and only proves how sneaky these store cards are.

To avoid or not to avoid

Personally, I think store cards are a rip-off and are well worth avoiding. Until this practice came into force, I might have admitted that there's nothing inherently wrong with store cards if you know you can definitely pay off your balance in full each month, as they can provide some decent rewards. But now, with the introduction of a possible fee for being in credit, I'm even more against them than I was before. And I personally wouldn't touch one with a barge-pole.

Smarter ways to spend

If you know you won't be able to pay off your credit card bill in full each month, and you're looking for a 'buy now, pay later' facility, the best way to pay for your items is on a 0% new purchases card.

The Tesco Clubcard Credit Card, for example, offers 15 months interest-free on all new purchases. So that means you've got a year and three months to pay off your balance before you'll be hit with any interest.

On the other hand, if you know you will pay off your balance in full every month, why not opt for a cashback credit card? These cards pay you back a proportion of what you spend - but are not solely limited to one shop. So this means you can be rewarded on one card wherever you decide to go shopping.

The American Express Platinum Cashback Card, for example, gives you 2.5% cashback for three months (up to £100 cashback) and 1.25% thereafter, plus 2.5% for a month on your anniversary. The downside with this card is that American Express isn't accepted everywhere. And don't forget that you really must pay off the balance in full each month - otherwise you'll be hit with high interest rate.

Finally, if you already have store card debt that you're struggling to pay off, move it on to a 0% balance transfer card such as the Barclaycard 22 Month Platinum Card which offers an interest-free period on balance transfers for 22 months - giving you plenty of breathing space while you sort out your finances. You will be charged a transfer fee of 2.9% with this card, but it should still work out much cheaper than keeping your balance on a store card.

So remember, there are several alternatives to store cards - and much better ones at that. So if a shop assistant tries to lure you in to signing up to a store card with enticing reward offers, think about it carefully. And if you know there's a chance you won't be able to pay off your bill in full - even the teeniest of chances - resist temptation!

This is a lovemoney.com classic article, updated for 2011.