Christmas warning over store credit

TRADING standards officers have issued a bleak warning to shoppers after a special investigation revealed how easy it is to rack up debt on store cards.

TRADING standards officers have issued a bleak warning to shoppers after a special investigation revealed how easy it is to rack up debt on store cards.

They issued seasonal advice to consumers as an undercover operation in Ipswich, shadowed by the East Anglian Daily Times, showed it was possible to gain five cards in an hour and a half with a combined spending power of £1,250.

However, trading standards said the cards should not be viewed as a short-term cash fix, as consumers could be stung by nearly 30% APR if they do not pay the debt off quickly.

Peter Monk, portfolio holder for public protection at the Suffolk County Council, said: “Putting Christmas on credit may seem like a good idea but you may find yourself still paying it off this time next year.

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“The minimum monthly payments aren't an option, they are a must. If you miss these payments there will almost certainly be penalties to pay.

“It is always tempting to pile up the credit, especially at this time of year but taking a minute to think of the repayments that will have to be made when Christmas has been and gone could save 2005 being an expensive year.”

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Sasha Watson, a business and consumer support officer for trading standards, was given the store cards in town centre shops yesterday .

Miss Watson said: “Store cards are now part of the sales patter. Normally if you buy any item then straightaway they ask you if you want a card, so they are sold to anyone and everyone.”

And trading standards officer Matt West warned shoppers: “It maybe 10% off on the day if you open a store card but in the long run you could be paying more than that back.

“The reason the companies are offering credit is for them to make money. “Credit can be a good thing for people if they use it responsibly and it can be an excellent way to manage your finances.

“But if people see it as free money, as a gratuity, they need to seriously consider the repayments, not just what they are getting at that particular time.”

Although store cards often attract people wanting quick access to cash, Mr West felt the system would work better if more questions were asked about people's ability to manage their finances.

The shop assistants, who deal with the applications and often have to meet targets should also be given more training, he said.

However, consumers need to be cautious, take charge of their finances and what they can afford, Mr West added.

He said: “I think this has shown how easy it is. The average Christmas spending is now about £900 and I'm sure a lot of people would struggle to find that.

“But with store cards that £900 could turn into nearly £1,200.

“The very fact that a person can't spend £900 in the first place indicates that they will not be able to pay off much each month.

“They are also rolling accounts - the credit can go on as long as you want if you pay the minimum amounts.

“You don't have to re-apply each time, whereas with a bank loan of, say, £3,500 you would have to sit through questioning.

“If you get it in the end and you want more you will have to sit through it all again.

“Often people don't like doing that. With cards you can pass it over and know it's been approved.

“They do not take into account anything else that has happened in the last few months.”

Ian Burnett, bureau manager of Ipswich Citizens Advice Bureau, said it was one of the negative sides of the current market.

“People tend to look at it in a simplistic way and think £300 on a card will have a minimum payment of £5 a month and I can afford that.

“But that £5 a month could take over five years to pay off the £300 and the interest.”

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