Shop Talk: Cards that won't do you credit

It's so easy. There you are in a big store full of sparkly lights and Christmas music and there are all these lovely things you'd like to buy for yourself, for your family, for your friends. And just when you think what a shame it is that you can't afford them, someone will offer you a store card.

Buy now, pay next year. You might even get a ten per cent discount or a special offer. What's more, you can fill in the forms at the till and within ten minutes, after a phone call or two, wow - you can walk out of the store with maybe £1,000 worth of goods. Easy peasy.

Remember all those stories your mum told you about accepting sweets from strangers? Well this is the grownup equivalent. You won't get gobbled up by the wicked witch but you could get swallowed up by debt. And store cards could make it all much, much worse.

The Bank of England interest rate has just gone up to 3.75 per cent. You can borrow money for around seven per cent. Yet many store cards charge a whopping 30 per cent interest rate.

A survey by North Yorkshire County Council Trading Standards officers at the end of the summer found some even went up to 34.9 per cent - a mind boggling ten times the bank rate. You wouldn't pay ten times as much for a dress or a tin of beans, so why do it for a loan?

If you spent £500 on a card at 30 per cent interest and just paid off the minimum each month, after six months, you would have paid out £140 - but only £78 of that would have reduced your debt. The other £62 would have been interest.

Do you really want to give the big stores that much of your money for nothing?

And don't kid yourself that you'll pay it all off each month, because we know that life doesn't always work out like that - especially in January. What's more, it's so easy to do. In the past, we've sent young reporters out into the High Street and within an hour or so, they've come back with store cards giving them thousands of pounds' worth of credit. Which is fine - until it has to be paid back.

MPs on the Treasury Select Committee recently described the companies behind store cards as "designer loan sharks" and accused them of "fleecing customers" - especially young people, who are seduced by large discounts off fashion goods as long as they pay for them with store cards.

The Office of Fair Trading is currently looking at all aspects of store cards - everything from the high interest rates to the ease with which you can get them - so there could soon be some changes. In the meantime...

WHAT TO DO

Think twice. Don't be seduced by the lady in the store, but go home and think about it. If you're really sure you know what you're doing, you can always go back the next day.

Make sure you know what the interest rate is. Most are around 30 per cent but Marks & Spencer is around 19 per cent and John Lewis is around 13 per cent.

If you really need credit for more than a month or so, then think about taking out a loan. There are some very competitive rates around, starting at around seven per cent. Tesco online is 6.2 per cent and Northern Rock is six per cent.

Or use a credit card. Ideally, one with a 0 per cent balance transfer. This could mean that for between three and six months, you could not be clocking up any interest on your debt, which gives you a chance to pay off a decent chunk of it before the interest rate kicks in. And in any case, most credit card interest, after the introductory period, is around 15 per cent - still a lot less than a store card.

* If you can't afford it, don't buy it. Now there's a novel idea.

DO SOMETHING - BUY NOTHING

Tomorrow will be one of the busiest shopping days of the year. But not for some. It is also Buy Nothing Day - an annual event organised by environmentalists to make us stop and think about what we're doing.

Across the country (but apparently not, strangely enough, in this part of the world, where we clearly take our shopping seriously) there are all sorts of events planned. They include jolly activities such as cutting up credit cards or giant swap shops.

But you can join in simply by not spending any money.

Although it's all a bit daft really, underneath it all is a serious message.

Twenty per cent of the world's population consumes over 80 per cent of the world's natural resources. Also, large companies use labour in developing countries to produce goods, as labour is cheap and the workers aren't protected.

Before we go shopping, the Buy Nothing Day organisers ask us to ask ourselves a few questions, such as:

Do I need it?

How many do I already have?

How much will I use it?

How long will it last?

Can I do without it?

Have I researched it to get the best quality for the best price?

Of course, by the time you've asked yourself all that, the shop might have sold out of whatever it was.

But as we go into the biggest shopping month of the year, it does no harm to stop and think about what we're buying -and how we're going to pay for it.