Store Cards

A store card is a credit card that carries the brand name of a retailer or group of retail stores, and is only accepted in payment for goods or services at branches of those or associated stores.

One of the key aims of store cards is to provide credit to the widest possible range of retail customers, including those who might find it difficult to obtain other kinds of credit.  

This means, of course, that card lenders experience a higher risk of defaults compared with credit card providers (who require customers to have higher credit ratings). Store card providers have to set prices on the basis of risk, and the typical interest rates are consequently higher than for some other kinds of credit. To help prevent over-indebtedness, store cards have very low credit limits, starting at around £250.

Key stats

• 12.9 million store card accounts in the UK at the end of 2010
• Cards are used on average four times a year
• Average transaction value is around £60
• Credit limits are low; usually start at around £250 limit.
• Average balance on an card is just £132
• Store cards are not used for long term borrowing. The interest paid on the average balance in one month would be just £2.80
• Store cards account for less than 1% of outstanding consumer credit balances (consumer credit includes credit cards, personal loans, store cards, store instalment credit etc)
• More than half of all store cards in issue have a zero or credit balance.
• Customers like their store cards and are happy using them – complaints to the Financial Ombudsman about store cards are just 0.001% of all transactions, lower than for other forms of credit.

Consumer protection

All store card providers are regulated by the Consumer Credit Act (CCA) and must hold a consumer credit licence, granted by the Office of Fair Trading (OFT).

The Competition Commission investigated the store card market in 2006. Its main recommendation was the introduction of a wealth warning for store cards that charge more than 25% APR. Every store card statement where the APR exceeds 25% now reminds the customer that they may be able to access cheaper credit elsewhere.  

When a customer applies for a store card, they are presented with a summary box that outlines the main features of the card, including the APR, the interest rate, minimum payments, interest free periods and any other fees. A customer may cancel their store card account at any time, and the credit is not secured on their property.     

Nearly all providers of store card services are members of the FLA and abide by the additional provisions of the FLA’s Lending Code. This sets out standards of good practice and includes a section specifically dealing with store cards. The Code requires lenders to ‘act fairly, reasonably and responsibly’ when dealing with customers.

Government plans