Spending on store cards falls again as personal loan and credit card lending also see declines in spending, latest figures show.
Spending on credit cards and personal loans remains high despite registering a fall in October, the latest data from the Finance & Leasing Association (FLA) shows.
Credit cards and personal loans accounted for £2.56 billion of consumer lending in October, more than half of all consumer credit taken out in the month. Yet again, store cards saw a further fall in usage with just £121 million spent on the cards in October, down 15% compared with October 2011.
Overall, total lending to consumers by members of the FLA was £4.6 billion, up 7% compared with October 2011 and up 5% on the previous year.
What’s in store?
Consumer car finance rose by a massive 32% to £1.5 billion in October compared with the same month last year.
Store instalment credit also had a good month, showing a rise of 28% compared with October last year. However, while store instalment credit remains popular, store cards seem to be in terminal decline.
Over the three months to October, just £337 million was spent on store cards, down 17% on the same period last year. Over the 12 months, total store card spending was £1.53 billion, down 12% on the previous 12 months.
Store cards are offered by retailers, often through leaflets at the till, and successful applicants often get a discount when they first take out a card. But the interest rates on the cards are high – nudging 30% in some cases – and they are not flexible as they can only be used in the retailers offering the cards.
The demise of store cards can also be blamed on the continued interest in credit cards which reward spending at retailers. The Santander 123 card, for example, gives cashback at differing percentages depending where the spending is made – it’s 3% at petrol stations, 2% at department stores and 1% at supermarkets. There is an annual fee of £24.
Or Sainsbury’s Cashback credit card gives 5% back on the first three months’ spending at its supermarkets capped at £50 a month. After that, you get £5 cashback a month as long as you spend at least £250 at Sainsbury’s and £250 elsewhere.
For members of the Co-op, there’s a straightforward cashback credit card that gives one point for every £1 spent in Co-op stores and one for every £2 elsewhere. The cashback is added to the members’ share of the Co-op’s profits and is paid out twice a year.