Look at store cards to provide help in festive shopping rush
AS CHRISTMAS approaches, it is a great time of year to not only gain an extended period of credit at no cost but to obtain some attractive discounts into the bargain.
Store cards fulfil just such a role and there is no fee for any of them. They are credit cards, as opposed to the loyalty points cards issued by many retailers, notably the department stores. Unlike general credit cards, they are restricted for use in the specific company stores and internet sites.
Ikano Bank is now the largest issuer of store cards. It is a consumer finance bank established in 1994 and based in Nottingham. Its origins go back to a home furnishing business – Ikea – set up by Ingvar Kamprad in 1943 with just one branch in Almhult in Sweden.
The Kamprad family behind Ikea has seen the bank grow with its head office now located in Luxembourg. In the UK, Ikano Bank offers personal loans, typically at 3.5 per cent, and savings, ranging from one to five year terms on fixed interest rates which currently run from 1.75 to 2.46 per cent APR.
Ikano provides store cards for four well-known retailers: Karen Millen, New Look, Oasis and Warehouse. According to research by Moneyfacts, the interest-free period is 55 days for each card but 56 days with the Karen Millen plastic. There are several payment options including direct debit but they all have the same rate except for Warehouse.
The interest rate for the trio is 2.14 per cent per month which equates to a 28.9 per cent APR. The Warehouse card attracts a slightly higher 2.20 per cent per month, which is 29.9 per cent APR.
The other store card provider is the Home Retail Group whose apt motto is ‘Shaping the future of shopping’. Founded in 2006, it was well known for its Habitat subsidiary. The company used to own the DIY chain Homebase until its sale to Wesfarmers for £340m in February last year. In September 2016, Home Retail was acquired by the supermarket group J. Sainsbury for £1.4bn.
However, the Argos card is still provided under the name of Home Retail and not to date by Sainsbury’s Bank.
Home Retail charges different interest rates depending on whether a direct debit option is in place or repayment is made by other means. The monthly rates are 2.21 and 2.207 per cent respectively, an overall APR of 29.9 per cent. The interest-free period matches Karen Millen at 56 days. Interest is charged on the same basis for cards issued by both Ikano Bank and the Home Retail Group. It is calculated from the date an item is purchased if the account is not cleared in full each month. Some cards charge from the date a purchase is recorded on an account or an average daily balance during a statement period.
If planning to repay only the minimum sum monthly or close to that level, clearly there are many non-store credit cards with far better interest rates.
However, such published rates are indicative and depend on personal credit ratings and so it may be sensible to check that your file is correct with one of the rating agencies: Equifax, Experian and Leeds-based CallCredit.
It is possible to obtain a credit card with rates as low as 18.9 per cent APR (Halifax and Sainsbury’s Bank) on an introductory basis of typically 30 months.
All store cards come with appealing incentives, not only to attract initially to sign up but to retain loyalty. The Argos card comes with a variety of ‘buy now, pay later’ option plans and generous interest-free credit schemes. Upon opening the account at Karen Millen, a £20 gift voucher is sent with the card.
If £199 or more is spent in one transaction, the card holder can enjoy a six months’ interest-free term.
To encourage using the New Look card, 20 per cent is deducted from the second purchase used in store. There are also promotions and events which are exclusive to card holders.
At Oasis, there is a 15 per cent ‘welcome treat’ when spending in-store or online. Free delivery is offered to card holders on purchases and, like New Look, special offers are made exclusively for those signed up to the card. At Warehouse, a 20 per cent welcome voucher is presented on opening but must be spent on the same day. During the rest of the first week, Warehouse gives a reduction of up to 15 per cent.
There are two other famous retailers with credit cards with the advantage they may be used anywhere on a global basis. John Lewis offers its Partnership MasterCard with interest rates if not repaid fully of 18.9 per cent on purchases and 23.9 per cent for cash advances.
Marks & Spencer Bank has three MasterCard credit cards, all of which have the same repayment interest rates as John Lewis. The cards for both retailers are provided by HSBC.
To reward expenditure, the John Lewis plastic awards one point for each pound. The value can be redeemed in John Lewis or Waitrose branches when the total reaches £5. The Rewards Plus card from M&S gives double points for the first 12 months.
Its other two cards – Shopping Plus and Transfer Plus – give one point per pound spent with no introductory incentive.
Watch for using either the John Lewis or trio of M&S Bank cards abroad as they will incur foreign usage fees. The former card attracts a 2.75 per cent charge for use outside the UK including continental Europe. The M&S cards have the highest fees of all credit cards.
If planning to use a credit card abroad, seek one with no such loading fees which include Barclays Platinum Travel, Creation Everyday, Halifax Clarity (part of Lloyds Banking Group), Nationwide Select, nuba All Round, Post Office Platinum, Saga, Virgin Money Travel and Yorkshire Bank ‘B’ card. All are free to join.
Spanish-owned Santander offers three such cards: All in One (£3 per month), World Elite (£15 monthly) and Zero. World Elite is for existing customers only. Two are termed Reward Black and issued by NatWest and Royal Bank of Scotland and have an £84 annual fee.
There is an annual fee for Lloyds Bank’s Avios Reward of £24. Metro, which is a free card, has no loading in Europe but charges 2.75 per cent plus £1.50 non-sterling cash fee further afield. There is a minimum age restriction of 50 years with Saga for its Platinum Visa.
If opting for a credit card with no overseas loading fees, be very specific on the name as several providers have similar sounding labels for alternative products which may come with other benefits.
Of the credit cards with no foreign charges, a loyalty scheme is also offered by Lloyds Bank with Avios, both NatWest and RBS with their Reward Black and a cashback deal with Nationwide’s Select and both Santander’s All in One and World Elite.