High interest rates hurt store cards

Continued high levels of interest are behind the falling popularity of store cards, according to new research.

A survey published this week by Mintel found that few people who hold a store card use it regularly. Around 14% said they have used their card only once since signing up - and 20% used theirs "hardly ever."

The research found that while many people are tempted by introductory offers such as discounts off their first purchases, this does not guarantee that they will use the card regularly.

Mintel estimates that shoppers will spend £4.9bn on store cards before the end of the year - but it is predicting a 12% fall in overall spend in the next four years. Spending on store cards peaked in 1998 at £5.4bn before going down to £4.8bn last year.

The average annual percentage rate (APR) on store cards is often more than 30% - much higher than credit cards or personal loans.

According to Moneyfacts, the store card offering the best deal is the John Lewis card, with an introductory rate of 6.5% for the first six months and 13% thereafter. The runner-up is Marks & Spencer with 18.9%.