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You don’t have to have the lifestyle demands of Paris Hilton to need extra money these days. According to Credit Action, the total UK personal debt was 1,122 billion, a growth of about 10.5% over the previous year and in the UK and each adult in the UK has an average of 4.1 credit cards in their wallet.

In their most recent report, Credit Action also recorded 2.3 million personal loan agreements in the second quarter of 2005. Interesting, the national money education charity discovered a gap between the interest rates advertised for loans and the actual interest rates paid by the borrowers.

So, with such volumes of debt, what is the best way forward in managing your money?

1) Prioritise your spending

Decide what you need to buy and when you need it. If it’s not a necessity, put it to the bottom of the list. With Christmas approaching, it’s important that you have an awareness of your budget. Make a list of things you need to buy – including Christmas presents. Once you have a list, shop around for the cheapest deal – including some internet research. Thirty minutes of surfing the internet could result in significant savings, which will either reduce outstanding debt or contribute to savings.

2) Prioritise your borrowing

If you borrow money, when do you think you’d be able to pay it back? For example, for smaller amounts of money that could be paid within a shorter period of time – a credit card might be the most flexible way of borrowing money. Alternatively, if you need to borrow a larger sum of money and wish to make the repayments over a longer period of time – then a personal loan could be more effective. Do some homework online, sites such as moneynet and moneyfacts provide online financial product guides and price comparison information.

3) Prioritise your requirements

In addition to thinking about how much money you need to borrow and how you want to repay it, you may wish to look at other ways in which your financial products could work for you. Examples include cash-back, reward points, charity donations etc.

4) Never, ever, take out a store card

Whatever the discount the store offers you on the day, remember, it won’t be as a gesture of goodwill. Nearly all store cards carry a vastly inflated rate of interest and they rely on you not being able to pay off the balance in full straight away. There is a strong chance that what you ultimately end up paying – is far greater than the discount on the actual day.

5) Do you really need it?

As Christmas approaches, it’s easy to spend a little extra on clothes, food and drink and presents. However, if you make a list of what you need and stick to it, you’re likely to save yourself more money this way than if you went out impulse shopping.

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Store Cards No Credit Check

It happens all the time. You go into one of your favourite shops and hear the offer over the public address system: 'An extra 10% off today if you apply for one of our store cards.' This seems like a good idea for people who shop regularly in a particular place but there are a number of reasons to be careful about applying for store cards.

When Is A Store Card Not A Store Card?

First of all, the name 'store card' is misleading. It makes them sound friendly. But store cards are another form of credit card. Like credit cards, people can use store cards to defer payment for purchases. Like credit cards, store cards charge interest on uncleared balances. And like credit cards, people have to apply for them.

Although it can be tempting to have a store card for each place you shop in, people should avoid this temptation. Every store card application will become part of your credit history. People who make more than three applications within a seven month period are likely to be turned down for some cards. This will adversely affect their credit rating.

Store Card Interest Rates

A key difference between store cards and credit cards is the interest-free period. While credit cards typically have interest-free periods of up to 56 days, many store cards have none. People pay interest on the debt from the day it goes on the card.

What is worse, the interest rates on most store cards are very high. The Competition Commission recently said that British consumers were being overcharged by ?100 million a year due to the high interest rates. In fact, the Commission suggested that store cards should carry a 'wealth warning'.

Interest rates on normal credit cards typically range between 8% and 20%. In contrast, store card interest rates are usually around 30%. This makes a tremendous difference when paying back a debt.

Other Store Card Fees

Store cards also charge high late payment fees, making them very expensive for consumers. And the payment protection insurance offered by many cards may be higher than that charged on regular credit cards.

Not all store cards fall into this category. There are some retail outlets that offer cards with similar rates to regular credit cards. Store cards that are badged by the retail outlet but issued by a bank may also have competitive interest rates.

Getting The Best From Store Cards

With high interest rates and low interest free periods, it is easy for consumers to pay over the odds for store card credit. To avoid this, it's best to:

- Read the fine print to see what rate of interest applies to the card. This will be listed under the heading 'typical APR'

- Check whether there is an interest free period

- Pay off the outstanding balance within a month

Another option is to avoid the store card and use another credit card with a better interest rate.

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Both Rachel Lane & are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

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