As the school term approaches, many parents are likely to be heading to the shops once again to invest in clothing and equipment for their children - but cheap loans might be a better way of covering the outlay than taking on store cards, which many commentators have said are a costly way to fund such purchases.
According to Credit Action, a national money education charity, store cards can be "an expensive way to borrow," with annual percentage rates (APRs) significantly higher than on many other financial products.
Chris Tapp, deputy director of the group, remarks that such cards are more expensive than normal credit cards - and much more costly than a loan. "Doing a rough comparison, you'll probably be talking about having an average APR of 15 or 16 per cent for a credit card, whereas a store card is likely to be four or five per cent higher than that, probably closer to 20 per cent," he explains. "So they will be slightly more expensive than credit cards and certainly far more expensive than something like an overdraft or a loan."
Mr Tapp's observations come as insurer esure tots up the true cost of packing the kids off to school - calculating that today the average value of a full schoolbag has reached 265 pounds. The likes of mobile phones, memory sticks and sporting equipment are all increasing the cost of what children habitually carry to class - and searching out the cheapest loans could certainly be considered as a way of purchasing expensive items such as musical instruments.
Nikki Sellers, head of home insurance at esure, said: "Gone are the days of arming your kids with a fountain pen, exercise book and a pair of plimsolls on the first day of school. Nowadays designer gear and hi-tech gadgetry are the must-haves for today's school children."
Mr Tapp has also stated that the way that store cards are marketed is problematic, in that they could be accused of encouraging people to get into debt: "Because store cards are pushed very heavily at the point of sale at the counter - and often alongside a discount, [such as] ten per cent off your shopping that you are doing on the spot if you take out the store card - that really encourages people to pick them up without really thinking through whether the store card is value for money or how the store card works."
Recently, Citizens Advice conducted a survey on school uniform costs, allowing parents to comment on whether it is reasonable to expect uniforms to be purchased from a specialist supplier and the degree to which such purchases cause financial struggles for the family. The results of the survey are set to be published this autumn and will be used in lobbying the government to provide guidance on ensuring that uniforms are affordable.
Earlier this month, consumer watchdog Which? added its voice to those calling into question the use of store cards in place of cheap loans and other financial products. Martyn Saville, senior researcher for the firm, reported that anyone able only to make minimum repayments on such products are likely to suffer increased financial strain as a result of taking on such high-interest debts.
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