5 Ways to pay your store card

PUBLISHED: Tue, 22 Nov 2016 14:17:07 GMT

Justmoney is calling on consumers not to overspend on their store cards this Christmas as the interest rates charged on them are high and you could be stuck with too much debt in 2017. “You could be paying through the nose in interest charges and admin fees if you don’t pay your store card off religiously or before the interest free period ends. It’s for this reason that I’d recommend that consumers not whip out their store cards at every opportunity in the run up to Christmas and take careful stock on what they can afford to spend,” says Angelique Ruzicka, editor of personal finance websites Justmoney and Moneybags.

Justmoney is also encouraging store card owners who opened accounts prior to 6 May 2016 to close their accounts and re-open them (if they still want them) to save money. “Consumers who took out store cards before the laws changed on the 6 May 2016, could be paying as much as 25.4%* in interest and paying monthly admin charges on top of that. Since the laws changed in May, stores cannot charge more than 21% in interest. Some are trying to recoup that by charging more in admin fees. Take a look at Justmoney’s comparison table where we illustrate the monthly charges, admin fees and interest you are charged and if you still want to get one try to pick store cards that charge a fair admin fee,” recommends Ruzicka.

Justmoney’s call comes as The Foschini Group (TFG), Truworths and the Mr Price Group are taking legal action against the National Credit Regulator (NCR) and the Department of Trade and Industry. “While retailers may be unhappy with the affordability assessments imposed on them by the NCR and government, we feel it’s essential that such laws are in place. It was just too easy to access credit,” points out Ruzicka.

Below are just a few ways in which you can save money if you own a store card, according to Justmoney:

  1. Make sure you don’t pay any interest: Only apply for a store card if you qualify for the 6 month free interest version. Then, make sure you pay your store card off in full before the 6 month interest free period ends so you don’t pay any interest on the balances.
  2. Sort out your credit score: If you have a poor credit score or no credit score at all don’t open a store card until your credit score is better. Stores will typically only offer 6 month free interest cards to those with good credit scores. If you have a bad credit score you are seen as a risk and will only be offered store cards that charge interest rates.
  3. *Close then re-open your account: One way to counteract paying a higher interest rate would be to close your clothing account and then open a new account. From 6 May 2016, the laws around credit agreements and what you could be charged in terms of interest rates and initiation fees changed. If you opened a store card after 6 May 2016, then you would be paying far less in interest (up to 21%) than someone who had opened one prior to that date (could be charged as much as 25.4%). However, remember that clothing accounts are a form of debt, and where possible it is better to avoid taking on unnecessary debt and expenses.
  4. Don’t overspend on your store card: If you simply must own a store card try to keep spending on it to a minimum. Many stores charge monthly service fees on top of the interest you pay on outstanding balances. With this in mind, it is important to closely monitor any spending you do on a store card.
  5. Don’t own a store card: Some view a store card as a gateway to building a credit record. While it is important to build a credit record to allow you to make larger purchases in the future, such as a house or vehicle, for which you will probably need a loan, there are other ways to go about this. For example, a cell phone contract is cheaper and doesn’t charge you interest. 

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