Some large retailers such as Marks & Spencer, IKEA and Top Shop have their own store cards. These are similar to credit cards but can only be used to purchase goods from the specific retailer that issued them. They offer special offers to attract customers but the APR can be very high.
(d) Charge cards Charge cards are very similar to credit cards except that you must pay off all the money owed when you receive your monthly statement. The most popular example is American Express.
Did you know?
Plastic money is a specific term used to describe all types of card-based purchases including debit cards, credit cards and store cards.
Evaluation of credit, store and charge cards Amount: The amounts available are relatively small (usually a few thousand euro). Cost: Interest on credit cards is very high if bills are not completely paid off on time. Compound interest is charged on unpaid debts. Risk: Many people end up with serious debt problems due to being unable to manage their credit, store or charge card bills. While these cards can make shopping easy and provide a short-term source of credit finance, consumers need to have actual money in their bank account to pay off the monthly bill. Credit, store and charge cards encourage short-term thinking, while wise financial management requires long-term planning.
¶ ¶ ¶
(e) Bank overdraft Overdrafts allow a current account holder to spend more than they have in their account but only up to a certain limit.
Evaluation of overdrafts Amount: The amounts available are usually relatively small. Cost: The rate of interest charged on overdrafts may be cheaper than that charged on credit cards if the money is only being borrowed for a few months. This makes overdrafts a relatively cheap form of short-term borrowing, provided the money is repaid quickly and within the agreed period. Risk: If the money is not repaid on time you will damage your credit record and may not be able to take out any loans in the future.
