Consumer groups have accused the Competition Commission of not going far enough following its investigation into store cards.
If had to name my three least favourite financial products, the list, in no particular order, would include extended warranties, payment protection insurance and store cards.
Some or all three of them have been the subject of investigations by various consumer watchdog groups and none have come out well. When the likes of Which?, the National Consumer Council, the Office of Fair Trading and the Competition Commission express doubts about whether these products offer value for money and/or are sold with clear information to consumers who are made aware of exactly what they're signing up to, you start to wonder why the financial services industry has been getting away with it for so long.
The latest product to get a drubbing is the store card. The Competition Commission has been investigating store cards for the last 18 months at the request of the Office of Fair Trading and yesterday, they announced a number of recommendations that are designed to address the lack of transparency in the way store cards are offered and used.
Among other things they say the Annual Percentage Rate (APR) should be displayed prominently on statements along with a 'wealth warning' about how expensive the debt could be and full information on late payment and insurance charges.
Unfortunately, consumer groups say the recommendations don't go far enough and they've got a point. Consumers need this sort of information before they actually sign up for a store card, not afterwards. And they say the Commission hasn't really addressed the issue of mis-selling either.
As Which? points out, store cards are an unnecessary and extremely expensive way to borrow and they would advise people not to use them because there are much cheaper ways to borrow.
You may sign up for a 10% discount offered by a store card but unless you pay it off in full each month, the interest charges are likely to wipe out the benefits you thought you were getting. Credit cards which offer a 0% introductory deal on new purchases provide good value for money or, if you're carrying debt on your store card already, then transferring the balance to a 0% credit card is an even better bet.
Check out the deals in our Credit Card Centre.
