Many shoppers are familiar with being offered a 10 per cent discount or more on purchases if they take out a store card. But with a ban on such discounts looming, will store cards survive?
If you’ve been in any high-street retailer you’ll be familiar with being offered 10 or even 20 per cent off your shop at the till – provided you take out a store card.
But this is the last Christmas you’ll be offered such discounts.
Retailers are to be banned from offering these money-off deals and free gifts to shoppers in the first week of them taking out a store card.
There will also be a ban on retailers paying staff commission for promoting store cards, as well as the introduction of standardised training for staff who sell the cards.
The new rules are aimed at stopping shoppers being tempted into debt.
The rules form part of a new voluntary code by the British Retail Consortium and the Finance and Leasing Association, which represents UK store card providers.
Consumer protection
The government has welcomed the new consumer protection measures which come into effect next year.
Financial Secretary to the Treasury, Mark Hoban, said: "The public told us that consumers can be tempted into taking out a store card by being offered a discount at the till.
“We've listened to these concerns and have worked with industry to develop a strong package of measures in response."
British Retail Consortium director general, Stephen Robertson, called the introduction of a week-long separation between taking out a store card and receiving discounts “a common sense compromise”.
“This will give people enhanced consumer protection with access to the benefits those cards provide, he added."
No cap on store card interest
But a cap on store card interest rates, some of which top 30 per cent, was ruled out by Consumer Minister Ed Davey.
He said such a move could drive people to use loan sharks.
"A cap would not be in the best interest of consumers as pricing some consumers out of the market could force individuals to seek unregulated or high-cost credit," he said.
High-street retailers Argos, Homebase and Dorothy Perkins all have annual interest rates of 29.9 per cent on their store cards.
But without the attraction of instant discounts, some are questioning the future of store cards.
End of store cards?
Chris Griffiths, head of money at Confused.com, says the ban on point-of-sale discounts could spell the end of store cards in their current form.
“Till-point discounts are one of the biggest reason shoppers take out a store card in the first place, so the ban will probably mean the end of these cards in their current form.
“Retailers will have to adapt the way store cards operate to persuade customers to use them, perhaps as loyalty cards offering some form of ongoing discount.”
Smarter spending
Griffiths says there are many credit cards on the market that offer shoppers a better deal when compared to store cards.
“With cashback credit cards you aren’t tied to one retailer for a discount, you can get cashback on all of your shopping across different retailers.
“If you maintain a balance on your card you should opt for a card with a low interest rate or, even better, consider a card offering 0 per cent interest on balance transfers.
“If you’re looking to spread the cost of new purchases, consider a card that offers 0 per cent interest on new purchases.”
Bear in mind that some of these cards, particularly the 0 per cent cards, are aimed at prime customers - that is, those with good credit records.
Confused.com offers a free Card Matcher tool that shows you how likely you are to be accepted before you apply.
What do you think of the ban on point-of-sale store card discounts? Do such discounts really tempt consumers into debt? Or should shoppers be left to make their own decision on whether to take out a store card because of the instant discounts offered?
