If you are making a major purchase, you know how difficult it can be to save up the entire cost in your bank account. Often, many people turn to credit cards to help get that special item more quickly. In some cases, the purchase is made at a store that offers its customers the ability to make the purchase on credit with a store charge card. When deciding which form of credit to use for your purchase, it is important that you look at the pros and cons of both store and regular credit cards side by side, to ensure you will get the best financial deal for your money.
You’ll find that deals and rates on store cards differ from shop to shop so be sure to check out the terms and conditions to check you’re getting a good deal. If it’s a credit card you’re after, your best bet is to use a comparison site like Compare The Market to assess cards.
Before you decide which credit option will be the best for your needs, you need to know how store and charge cards are similar. Both types of cards are based on an interest-driven repayment plan. This means that an Annual Percentage Rate – or APR – is charged in interest based on the balance you carry. For example: if you have a card with a 24.9% APR, and you consistently keep a balance of £200 through purchases and payments, at the end of the year you will have accrued £49.80 of interest charges. This website has more information on APR.
Both types of cards also will have penalties if you fail to make timely payments. While you can occasionally have a late or missed payment's fee waived, you will usually have to pay a penalty. In addition, late or missed payments can raise the interest rate on your card, or cause it to be closed permanently for non-payment. So to use either responsibly, pay off your balance in full as soon as you can.
Most importantly, if your purchase turns out to be faulty by manufacturing or does not meet advertised standards, your rights and ability to recover your money on purchases that cost between £100 and £30,000 are covered by Section 75 of the Consumer Credit Act of 1974. For instance, if you spent £550 on a piece of jewellery advertised as gold and diamonds, but on closer inspection the diamonds were discovered to be cut glass, the right to get your money back from the seller would be protected.
While store cards and credit cards are very similar in many ways, their differences can be the deciding factor in which one you choose to make the purchase.
What and where you are purchasing from is the first thing you should consider when deciding how to pay for an item on credit. While credit cards can be used many different places, store charge cards can only be used at the store from where they are issued. This means you can't use a Debenhams card to buy a leather jacket at the amazing little boutique down the road, no matter how nicely you ask.
What if you are making that leather jacket purchase at a larger store that offers a store charge card? This is where the differences on which card you choose will begin to come into play. The first thing to consider is the interest rate. Many times, a store charge card will have a higher APR than a standard credit card. If you are planning on making monthly payments, rather than paying off your bill quickly, the card with the higher APR will cost you more in the long run. However, this isn't necessarily a bad thing. If you are looking to build your credit rating, the extra time paying off the amount – provided you make all payments on time – will reflect well on your credit score.
While many different cards, both credit and store charge, have point systems, this should not be taken into consideration unless you are actively saving for something, such as airline miles for a specific trip. If this is the case, all purchases should be made on this one card. Otherwise, the points are often too spread out over various card and reward programs to make much of a difference.
How often you will be using the card with which you make the purchase should be a final deciding factor. If you plan on putting the item on a card as a one-time use and making monthly payments of the same amount until the charge is paid off, a fixed APR – as usually found on store charge plans – would be the better choice. However, if you plan on making repeated purchases and paying different amounts every month, a credit card would be the better payment option.
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