1. They charge excessive rates of interest.
   The interest on most store cards is often double that of ordinary credit cards.
2. Hiding the facts.
   It often isn’t very clear when you sign up in store as to what the APR or interest rate is. One thing’s for sure, it will be high!
3. Pushy Sales Methods.
   Shop staff are usually incentivised by commissions for signing people up and as a result they can be very persistent.
4. Untrained Sales Staff.
   They are often promoted by untrained shop staff, who have little idea of the impact and associated dangers of such high interest rates.
5. Limited Offers.
   The common ‘carrot’ to sign up, is a 10% introductory discount, after which you don’t get any further offers.
6. They’re targeted at the young.
   This is the first piece of credit many young people get. They’re an easy target and often spend on these cards without understanding how to manage them, racking up expensive, ill-afforded debts.
7. They charge us more and get our business.
   With these cards the stores guarantee that we spend on them in their shops. Yet to do this they charge us more even than a credit card. So much for loyalty!
8. The OFT is concerned about them.
   The Office of Fair Trading is concerned about the sales tactics used here and advise you to take the forms away and read the small print carefully. If you do this, stores generally then refuse to give you the introductory offers!
9. Christmas is coming.
   This makes it more important than ever to try to avoid using store cards wherever possible. This is because of the tendency to overspend when you enter the store for which you have a credit card .The reality of spending too much on store cards sinks in when you get your statement in January. Not such a Happy New Year!
10. They charge excessive rates of interest.
    OK, this one repeats the first reason, but that’s because it’s worth repeating again and again and again.

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1. Go through your last 3 months current account bank statements. Create a list for ‘Income’ (money coming into your current account) and a column for ‘Outgoings’ (money leaving your current account). For each month this shows how your monthly budget (income versus outgoings) is looking.
2. Highlight any financial products or relationships in your Outgoings column. This could include either loan, mortgage or credit card payments or regular savings transfers. Spend a little time, finding out more about and categorising each Outgoing.
3. Focussing firstly on the Outgoings you have identified as being ‘debts’, ask the following questions; what type of debt is it (e.g. Overdraft, store card, or mortgage)? What is the total amount outstanding? How long will these payments continue? What APR is being paid by you? Try and identify the most expensive form of debt.
4. Focus then on the regular Outgoings you have highlighted as being savings or investments and ensure you understand their key features. Are you earning some capital growth from these activities? Do you understand the risks of the investment? How quickly can you get your money out? Are you paying any tax on these activities?  Try and identify the least effective saving.
5. Now it is time to make your plan. You will need to maintain at least the minimum repayment on each of your debts, but can you find a way to accelerate the capital repayment? Even relatively modest increases in the monthly capital repaid to the lender, can have a significant impact on the total amount to be paid back overall. It is nearly always better to prioritise your debts, focussing on the debts that carry the highest APR.
6. Execute your plan. Having decided which debts to prioritise and how that will improve your wealth, you now need to make the arrangements. Contact your lender(s) and ask them to change the Direct Debit or standing order mandates. If you have decided on this course of action, transfer your least effective savings into your most expensive borrowing. Having all of the information gathered during steps 1 – 5 will help you to understand which savings to use and which debt(s) to consolidate.
7. Review regularly. Each month review your budget at the same time as checking your bank statements. Try to set yourself short achievable goals and have the commitment to see them through.

We’d love to hear your views on our approach and hopefully hear back from those who have implemented their own plan.

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Often it’s hard to recognise if you have a debt problem. Once you have, it can feel like the end of the world and panic measures set in so it’s beneficial to spot the signs early on. For example, can you only afford to make minimum payments on your credit or store card repayments? Do you regularly struggle to pay for your basic living costs (eg rent, mortgage, council tax, utilities)? Does your list of income and expenditure shows that you have more going out than coming in?

If you recognise these signs, the obvious starting point is can you increase your income or reduce your spending?

On the income side, check that you are claiming your full entitlement to social security benefits and tax credits and that your tax code is correct. Also, consider whether you can increase your income through working additional hours or taking a part time job. Have a look in your attic and cupboards, you may be surprised with what’s there giving you the opportunity to sell unwanted items for extra cash.

On the expenditure side, look to see how to save on your mortgage, insurance, and utility costs by visiting some comparison sites on the internet. Similarly think carefully if you can you reduce your regular spending in areas such as housekeeping, clothing, and other personal spending. Question if they are all necessary.

After recognising that you do have a debt problem, one solution could be debt consolidation. This involves borrowing more money to repay existing debts with the payments on the new loan being less than you currently pay on your existing debts.

If you fully understand the implications of what you are doing and are able to access new borrowing at a low rate of interest, debt consolidation can be an effective approach to a debt problem. Alongside this you need to aim to bring your budget back under control, pay back any future credit card spending in full each month without fail and start saving for future unexpected or irregular costs.

However, be very careful, consolidating often lead to worsening debt and sometimes even potential homelessness. The reduction in monthly payments often comes at a heavy price. Paying back your debt through a new loan over a longer period may sound good but because of a reduced monthly payment, seeing how much you will have to pay back in total could be much more than you expected. Also, if you are a homeowner your consolidation loan is often secured against your house which means if you fall behind on your loan payments you risk losing your home!

Debt consolidation is a growing sector and companies vary significantly in their approach, so make sure that you do your homework and are dealing with a reputable organisation that explain all of the options open to you.

Finally, consider using some simple personal finance software that will keep the position with your personal finances up to date and should highlight debt issues early. The earlier the problem is identified the easier it will be to control.

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