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Store card debt. Advice if you're in arrears.

Store cards are a type of finance agreement that lets you buy goods in certain shops and pay for them later.

You get a plastic card which you can use to pay, and you’ll be billed later by the store card company. You can choose to pay the debt in one go or pay it off over time in instalments.

cog iconHave you received a letter from your lender warning you that your store card account is in 'persistent debt'? Find out what this means and what you should do.

Features of store cards

Most store cards will give you an incentive to open an account. This could be a percentage off your first purchase on the card, vouchers, access to special events or other perks.

This can make a store card look like a good idea, but there’s a big catch – the rate of interest is usually 20-30% APR or more, which is higher than many credit cards.

This means if you get the discounts and pay off the card balance straight away, you should end up saving money. But if you don’t pay it off immediately, the interest rate means that you are likely to end up paying a lot more.

Some of the risks of store cards are:

  • It’s tempting to spend on a store card and run up a debt that you can’t pay off in full at the end of the month
  • You’re more likely to use your store card instead of shopping around for the best deal. This means you can end up missing better bargains elsewhere
  • Store cards usually have a small credit limit, but this may be increased as you keep using the card. A higher credit limit means you risk running up a larger debt which will be harder to repay
  • Store cards are often promoted in shops at the tills, but the shop staff may not be able to give full information about interest rates, minimum payments or charges. Store cards may be promoted to people who don’t need them or can’t afford them

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Store card minimum payments

All store cards have a minimum amount you must pay back each month.

The minimum payment is usually just a bit more than the monthly interest charged.

This means if you only pay the minimum payment on a card, it will take a very long time to repay. Always try to pay more than the minimum amount if you can afford it.

Store cards and persistent debt

If you have a persistent debt on your store card account, it means that you have been making no more than the minimum payment towards your account over the last 18 months. 

Store card providers are now obliged by the Financial Conduct Authority (FCA) to contact you if you have a persistent debt according to the following timescales:

cog iconHave you received a letter from your lender warning you that your account is in 'persistent debt'? Find out what this means and what you should do.

After 18 months of persistent debt

You’ve repaid more in interest and charges than you have towards your balance over the past 18 months. At this point, your store card provider will contact you. They’ll encourage you to take action so that by month 36 (i.e. 18 months’ time), you no longer have the persistent debt.

After 27 months

You’ll be contacted again by the provider if your account remains in persistent debt (in other words you have only made minimum payments). Once again they’ll encourage you to take action.

After 36 months

If you still have a persistent debt on your account, your provider should offer you a way to pay this off within three to four years. They may suggest:

  • An affordable payment plan so you can clear the debt quicker or
  • Clearing the debt altogether by using a credit product, such as a loan or credit card

If these aren’t suitable, they’ll consider other options such as suspending interest and charges, or reducing your account’s minimum payment. This may involve suspending your account, and could impact your credit file.

Store card arrears

If you don’t pay the minimum payment every month, your account will go into arrears. Charges will be added for each missed payment, usually £12 each time.

Your creditor will contact you to demand the missing payments are made, and if you don’t do this eventually the account will default and further action may be taken.

For more information on what action a store card provider can take to collect a debt, see our what your creditors can do section.

Store card debt help

If you’ve got a store card that you’re struggling to pay, we can help you. Our online debt advice tool can give you personalised debt advice and recommend a tailored solution to help deal with the debts you have.

If you’d prefer to talk to us, call our advice teams (free from all landlines and mobiles).