Study: Store card spending drops by 20%

By UK CreditCards.com

Spending on store cards has dropped significantly in the past year, according to new figures from the Finance & Leasing Association.

The organisation's latest data indicates that store card lending fell by 20% between August 2010 and August 2011.

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Although total consumer credit lending fell by 2% in this period, store cards saw the largest fall, accounting for just £1.8bn worth of spending during the period in question. Lending on credit cards and personal loans fell by 2% during the year, to stand at £32.4bn.

Drop coincides with high-street sales slump
The falls have been attributed to the continuing state of the economy, with a slight rise in total consumer borrowing during the month of August put down to holiday spending.

According to consumer group Which?, the fall in store card lending may be tied to the wider slump in spending on the high street, as consumers look to tighten the purse strings in the face of rising inflation.

Nicolas Frankcom, researcher at Which? Money, took the opportunity to warn consumers about potential pitfalls when using store cards, which are often accompanied by large interest rates and fees.

"It's not surprising that people are no longer using them to borrow," he said. "Our upcoming report demonstrates how careful you have to be when it comes to these cards."

Alternatives to store cards recommended
According to the consumer group, one of the main problems with store cards is that they are being offered alongside poor advice from retail staff. It warned that interest rates as high as 30% can easily cancel out any potential discounts they offer.

Instead, Which? recommends that shoppers consider spending on 0% credit cards or cashback credit cards, while making sure to budget effectively in the run-up to Christmas.

See related: How to fight inflation with a credit card; New cashback credit card deals hit the market

Published: 24 October 2011