Shopping: there`s more than one kind of debt…

A lot of people use credit when they`re shopping. Not everyone realises how many different types of credit there are - or how much they could improve their finances by putting some more thought into how they `buy now and pay later`.

Some figures from moneysupermarket.com tell us more about `how shoppers can make the biggest savings by looking beyond introductory offers and understanding the small print`.

A lot of major store cards, for example, charge an APR (Annual Percentage Rate of interest) of 29.9% on a debt. So spending £500 would lead to £74 in interest over one year.

But that`s not the only way to borrow the money. A credit card with an interest-free introductory period might come with an APR of 16% - and charge nothing at all for the first 15 months. So someone who could pay it all off during that interest-free period would pay no interest at all, while even someone who took longer would pay significantly less than someone using a store card (with an APR of 29.9%) for exactly the same purchases.

Some store cards, however, offer other benefits, from discounts on someone`s first purchase to vouchers that are handed out when they make a large purchase. Cards like these can make a lot of sense for people who can transfer that debt to an interest-free balance transfer card, or pay it all off before it attracts any interest - while people who can`t do that might find that the effects of a higher interest rate cancel out any benefit.

"What stories like these remind us of is how important it is for borrowers to find the right kind of credit for them," said a spokesperson for debt management company Gregory Pennington.

"Just because one person finds that a certain card meets their needs doesn`t mean it`ll be the right choice for their family and friends. So if you do choose to borrow, take your time, read the small print - and if you`re still not sure, it`s well worth talking it over with an expert before you commit yourself."



Gregory Pennington offer debt advice and debt management plans, as well as a range of other debt solutions. If you are worried about debt, contact one of our expert debt advisers now.