Charge cards that store up your debts

HARD-UP CHRISTMAS shoppers can sometimes find it tempting to apply for last-minute store cards at the store they hope to buy some of their gifts from. Indeed, research shows that impulse is among the most important reasons when applying for a store's charge card.

The number of cards is on the increase. According to the British Retail Consortium, there are over 12 million in issue, with an average balance of pounds 170. But whether most of these cards give value, by comparison to mainstream credit cards, is open to question. With just a couple of exceptions, store cards charge the highest interest of any card type.

More traditional "option" store cards mostly offer an interest-free period of 56 days, then charge interest from the date that purchases are charged to an account, if it is not cleared in full each month. It is that interest charge which, with few exceptions, can bring tears to the eyes.

The very cheapest cards are from Fortnum & Mason (16.8 per cent APR) and John Lewis (18 per cent APR). But most store cards charge APRs at least 5 per cent higher even than than the average 22 per cent APR on bank-supplied credit cards.

The most expensive include Style Card (up to 39.2 per cent APR) usable at over 25,000 retailers, and Country Casuals (29.8 per cent APR). These rates are charged when you pay off your card by direct debit. Payment by any other means will push up interest charges by an average of 2 per cent.

A growing number of stores also offer so-called "budget" cards. These have no interest-free period: you pay interest on your balance from the date you incur it. Most of these budget cards charge exactly the same APRs as the "option" cards on issue from the same stores.

Some electrical retailers, such as Dixons, Curry's and Powerhouse, only offer budget cards. In all cases, your credit limit on these cards is set as multiples of 24 to 25 times an agreed monthly payment to the card account.

Budget cards are designed for those people who are unable to clear their monthly balance. The extra cost of these cards over bank cards with no interest-free period can be as high as 15 per cent.

Retailers claim to offer cardholders extra benefits. Harrods, Fortnum and Mason, and others, arrange cardholder-only, pre-Christmas shopping evenings. Viyella offers free alterations to clothes bought with its card.

Many stores also give cardholders early access to their annual sales, and some offer extra discounts for card purchases whenever they hold sales. Marks & Spencer offers cardholders preferential personal loan rates.

At best,the "option" store cards offer convenience, but only if you pay them off within the interest-free period. Otherwise, like the "budget" cards, they are more expensive than equivalent cards directly available from banks.

Unless you have a mania to incur vast debts and pay through the nose to service them, these are usually cards to avoid.