Store credit cards often seem like a tempting prospect. They are pushed at us by enthusiastic sales people and heavily marketed at the point of sale, with an array of tempting offers such as instant acceptance and savings on your shopping.

The temptation to take on a store card is strong, particularly when it’s one of your favourite brands and you’re keen to receive special offers and invites to ‘exclusive’ store events. And if you’re shopping in the run-up to Christmas, the incentives to sign up will fly at you thick and fast.

Buyer Beware
Once you’ve signed up and enjoyed the initial discount, however, the shocks can start to mount. Firstly, the interest rates on store cards are incredibly high. You can expect an annual interest rate of 30% or more, which is more than double than the APR you’ll pay with many regular credit cards. In fact, when you consider that the Bank of England’s base rate is still only 0.5%, you’ll get a sense of just how outrageous these interest rates really are. Many sales advisors skip rather lightly over these facts so it’s worth asking them for the information. Many of them don’t actually know the financial details of what they’re offering.

How the Interest Increases
It’s worth imagining a purchase scenario on a store card at a typical 30% APR to see the effects of this high interest rate. If, say, you bought £200 worth of goods on your new card, the typical minimum payment will be 2% of the balance outstanding (or £5 if greater). To pay off this debt in full at the minimum rate would take nearly eight and a half years, paying £293 in interest alone – which would be £93 in excess of what you borrowed initially.

So the inflated interest rates on these store cards absolutely outweigh the discounts you may receive when initially signing up, unless of course you are one of the rare few who can pay off their card balance in full every single month.

Other Catches
However, it doesn’t stop at the interest rate. Cards managed by Santander (which includes most of the main high-street store cards) charge £10 inactivity fees if the card isn’t used for six months. So even if you’re paying the card off in full, you can still be hit with fees. Factor in other fees for things such as late payments, for example and the costs really do keep coming.

Better Options
Savvier shoppers will look towards debit or credit cards. Cashback cards are ideal for those who pay off their credit balance fully each month and low or zero per cent cards are far cheaper ways to borrow for those who wish to spread the cost of their purchases over a period of time. These are offered by many providers and it’s possible to quickly see the latest deals by checking on a price-comparison website. Credit cards also offer extra protection for purchases made online if there are any problems with fraud, loss or the provider going out of business, so it’s worth making purchases over £100 by credit card. But always try to pay off the balance as soon as possible.

This guest post was written by British blogger Francesca, who enjoys writing about financial matters and sharing her best money saving tips. She currently writes on behalf of IVA Expert.

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Using credit can be beneficial by increasing your purchasing power as a consumer, but it can also cause big problems for your finances if you can’t stay in control of your debt. While you can always make a plan to pay off your debts quickly within your budget, credit can still be an issue. This becomes especially true when you take impulse purchasing into account—as experts agree credit cards drastically increase the chances you’ll buy on impulse while you’re out shopping.

Impulse purchasing is a problem unto itself, because these kinds of purchases are never factored into your budget. Particularly during these times when the economy is stressed, many consumers are on a tight budget which means they have limited means to cover unplanned purchases. Credit cards only compound the problem with interest added, so you can end up paying even more for your impulse buy.

If you make an impulse buy that costs you $200 and you use an 18% APR credit card to make the purchase. Most credit cards have a minimum payment limit of $15. If you only pay the minimum amount due each month, it will take you 15 months to pay off the debt in-full and you’ll pay just under $25 in interest. This means your effectively spent 12.5% more for your impulse buy than you would have if you’d just bought the same item in cash. While that may not sound like much, in a tight budget month this can actually start your finances down a road of financial trouble.

To avoid the problems impulse purchasing can cause for your finances, consider using these tips:

• Always shop with a list. Making a shopping list before you go shopping. This helps avoid impulse purchasing, because you go to the store knowing exactly what you need to buy. Statistics show the chances of making impulse buys decrease by 13% during planned shopping trips.

• Don’t buy something just because it’s on sale. Even if you have a shopping list, you can still get pulled into making an impulse buy by stores advertising sales. A recent survey indicates as much as 88% of all impulse buys are made because the item was on sale. Remember, a sale item you don’t need still costs you money you don’t have to waste.

• Avoid window shopping and strolling through malls. Your chances of making impulse purchases increase by 23% if the shopping trip itself was unplanned. Deciding to “just look around” at the mall on a lazy Sunday afternoon can end up costing you big with impulse purchases.

• Buying small items on impulse is still buying on impulse. While you may not be disposed to making large purchases on impulse, statistics show 14% of impulse purchases were made on food items. Buying even a few extra items here and there when you’re at the grocery store can still cause problems for your finances.

• Shop with cash. Of course the number one tip to avoiding impulse purchasing is to leave your credit cards at home and shop with cash. If you only take planned shopping trips, shop with a list, and only take enough cash to cover your planned expenses, then you can avoid buying on impulse with ease.

If impulse buys start to cause problems for your budget, don’t wait to find the solution you need to reduce your debt. If you can’t reduce your debt on your own, seeking debt help before you start missing payments ensures you have as many options as possible to get your debt back under control. Contact a credit counseling agency to have a certified credit counselor assess your debt. You can even find nonprofit credit counseling agencies that provide a debt analysis and personalized advice on how to get out of debt at no charge.

Author Bio:

Connie Solidad is a debt counselor at Consolidated Credit. She enjoys helping people get into better financial situations. When she is not at work she loves playing with her two dogs Pixie and Trixie in Tampa, Florida.

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Buying a new or used car is both exciting and challenging, especially if you must also arrange financing. Many automotive companies offer financing, making buying and financing a car a one-stop shopping experience. However, does it make sense to finance a car from dealer’s financing department or are you better off making alternate arrangements? Below are five considerations when choosing finance for a car that can help you make a better decision.

• Start by focusing on automotive companies that specialise in ‘finance’. These companies generally employ experts in the field of finance and are more likely to offer a better service. By specialising in finance, these automotive companies may also offer better terms and more choices than a company with limited financial resources or expertise. Common car finance options include: hire purchase or conditional sale agreements, personal contract purchases, personal leasing, and personal loans via a bank of financial institution. Motor finance companies may be housed within the dealership or have partnerships with dealers.

• Find out how the finance company works. Most large dealers can offer better deals than smaller dealers. If you’re looking for the lowest rates, then a large dealer with a dedicated finance department may be a good choice. On the other hand, if your financial situation needs a more creative approach, a smaller dealer may be in a better position to offer personalised deals. Smaller dealers may be more flexible whereas larger dealers may have a time-consuming, corporate process to go through to approve even the slightest deviation. In fact, it’s best to consider financing before you are ready to buy. Call the finance manager and ask specific questions such as:
  • Which motor finance companies do you work with?
  • What car finance products do you offer?
  • What are your typical terms (down payment, interest rates, length of loan, etc.,) for a car loan?

• Assess the sales pitch. Do you feel pressured or as if the dealer is looking for a fast sale and quick financing decision? Finance companies that have your best interests at heart and are not looking to make a quick sale on your behalf won’t pressure you to make a decision before you’re ready. The finance manager should take the time to thoroughly explain everything to you and answer any questions you may have. In addition, if you need more time to gather documents or consider your options, let the finance manager know you need more time. If you’re told that the car won’t last long and you better act quickly, take a deep breath and hold your ground. There are other cars and other financing companies that will treat you right.

• Avoid finance companies with hidden costs or out-of-pocket expenses. For example, a 0 per cent interest loan sounds as though it won’t cost you anything to finance the car, right? However, you may be required to put down a larger down payment or you could be ineligible for factory incentives. In some cases, factory incentives are a better deal than 0 per cent car financing. In addition, low and 0 per cent interest rates may only be available to borrowers with exceptional credit histories.

• Familiarise yourself with the laws regarding car finance and ensure the company is offering you the best service for your unique situation. A number of legal protections exist throughout the United Kingdom to protect consumers that finance car purchases. The Consumer Credit Act of 1974 along with subsequent amendments generally covers motor finance. For example, adverts detailing motor finance must be clear and easy to understand. In addition, regulations require that specific information is disclosed to your upfront before signing a consumer credit agreement. This information details the loans key features so that you are better able to comparison shop. If you borrow over £100 through a car dealership, additional consumer protections are available. For example, if the car is found to be faulty, the finance company and the dealership may be held equally responsible.

Though motor finance is regulated in the United Kingdom, it’s not always easy to navigate the many options available to you. By focusing on dealers that specialise in finance, learning how those companies work, understanding consumer protections, assessing the sales pitch, and avoiding financing with hidden costs and out-of-pocket charges, you’ll be in a much better position to make a smart car financing decision. Finally, consider arranging motor finance in advance and you’ll be in a better negotiation position as well.

Post contributed by Lucy Harper on behalf of Car Finance 247, providers of Car Finance help & Advice

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Money matters are very important. We all know that, right? So if you have unpaid bills and loans the best way to manage them is to pay them quickly. Did you know that by paying off your mortgage earlier you can save a lot of money?

Here are some useful tips on how to pay off your mortgage quickly:

1. Make extra payments ahead. You can start paying for your mortgage quickly by making extra payments if you have enough money, say when you get a raise or a bonus. Remember, the first few years are usually laden with huge interest so why not pay them early to reduce the cost of interest on your part? Paying early will definitely help you grow your equity.

2. Secure a copy of your loans amortization schedule so you can make early payments every month. Try to get a copy of your loans amortization schedule to keep you updated and to easily keep track of your interest and principal. Make it a habit to schedule your payments and pay off your mortgage with extra money every month.

3. Pay in annual lump sum. Another technique you can use is to make an annual lump sum payment for your mortgage. You can make use of your bonus or tax refund to pay your principal. Just try to check out first if your loan would allow you to prepay and check if there are certain guidelines involved in such payments.

4. Save, save, save. Another tip which can help you pay off your loan quickly is to manage your expenses well. Make it a daily habit to save money. Avoid spending too much on wants but instead focus on your needs. You can cancel your shopping spree for a while or save on gas by traveling by bus so that the money you save will be used to pay off your mortgage early.

5. Beware of traps. Pay smart. Did you know that bi-weekly payments are traps? Some creditors charge fees for bi-weekly payments and apply it only once a month. You might get surprised of the huge lender’s fee you pay for in this scheme. So check out the terms first before you decide to do this.

Paying off your mortgage quickly is a sure smart way for managing your expenses and saving thousands of dollars.

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