First floor: perfumery, hats, wigs... and a sky-high APR

First floor: perfumery, hats, wigs... and a sky-high APR

Shoppers trying to cut back on their spending this Christmas should avoid the lure of store cards - some of them charge up to 30.9 per cent APR.

The average interest rate on a store card - which functions like a credit card but is specific to certain shops - is almost 25 per cent, according to price comparison website moneyexpert.com, compared with a 6 per cent introductory rate on purchases using a credit card.

Anyone who has a card for Burton, Dorothy Perkins, Argos or Marks & Spencer will have seen their interest rate increase from last Christmas. M&S Money has been the worst offender, having increased rates from 18.9 per cent (for direct debit payments) last December to 23.9 per cent in October this year.

But M&S's is not the most expensive store card: cards run by Creation charge up to 30.9 per cent. Creation is the biggest store card provider and is behind the cards for names such as Selfridges, Sainsbury, Woolworths and Faith.

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Earlier this year, the Competition Commission concluded an inquiry into the store-card industry, ruling that providers should have to print warnings about high interest on their statements.

Store cards only have one advantage over credit cards, and that is the in-store discounts and other incentives they offer. The House of Fraser card, for example, offers £15 in vouchers for every £500 spent - but unless the balance is cleared straight away, the interest will outweigh any benefits.

The alternatives

Credit card users who pay off their balance in full each month might want to consider a card that gives cash back. American Express's Platinum card gives 5 per cent cash back on the first three months of use for spending of up to £4,000. After this the reward drops to a much more paltry 0.5 per cent for amounts up to £3,500 and 1 per cent between £3,501 and £10,000.

Capital One offers 4 per cent cash back for the first three months and then 1 per cent for all spending after this period.

Abbey has the best cash-back deal, according to Samantha Owens at moneyfacts.co.uk. 'It has the highest rate, at 5 per cent, but there is a restriction,' she says. 'The 5 per cent is only offered on the first £1,000 you spend in a supermarket until 31 January 2008.'

Citi is offering an even higher level of cash back via its Shell card. It gives 6 per cent on Shell fuel purchases and 2 per cent on all other spending for first 60 days. This drops to 3 per cent on Shell fuel purchases and 1 per cent on all other spending thereafter. The catch is that drivers must make at least one Shell fuel purchase in each six-month period.

Sainsbury's also has a card that gives Nectar points equivalent to 2 per cent cash back on Sainsbury's purchases. 'With 0 per cent APR on these for 12 months, it is one of the best offers around,' says Sean Gardner of Moneyexpert - but not, of course, if you don't shop at Sainsbury's.

Standard credit cards

While high-street stores should be avoided for their store cards, when it comes to their credit cards they are rated highly. A report by Which? last week named the John Lewis Partnership, the parent of food store Waitrose, as the top credit card provider for customer satisfaction. Eighty-four per cent of John Lewis/Waitrose customers surveyed by Which? Money said they were very satisfied with the service they received.

Many of the well-known credit card providers scored poorly - only 38 per cent of Lloyds TSB customers and 42 per cent of American Express customers were very satisfied.

For the best rates

· The Halifax Purchase MasterCard offers 0 per cent interest on purchases for 15 months, reverting to 14.9 per cent.

· HSBC offers 0 per cent for a year, reverting to 15.9 per cent.

Lenders are tightening up their lending criteria, so the best deals will only be available to those with an impeccable credit rating.

Guardian Unlimited © Guardian Newspapers Limited 2007