These cards charge sixty times base rate

There's a shocker waiting for you in retailers across the UK, as their store cards charge interest rates of up to 31% a year!

Since Barclaycard launched the UK's first credit card in 1966, spending on our 'flexible friends' has soared. According to banking-payments group APACS, more than three in five adults (62%) have at least one credit card, on which we spent more than £133 billion in 2007.

The main problem with plastic

Although credit cards are very convenient and easy to use, they do have several stings in the tail. While useful for short-term borrowing ('full payers' can enjoy interest-free periods of up to 59 days), credit cards are unsuitable for long-term debt. This is because they charge eye-watering rates of interest: close to 17% a year for purchases and around 25%+ for cash withdrawals.

Storing up trouble

Nevertheless, when it comes to high-street robbery, standard credit cards aren't the worst offenders. Our Roll of Dishonour is headed by store cards, which are credit cards issued by retail groups for spending in their shops. These are a great earner for retailers, as they stimulate spending in a particular retail or chain, and because they charge astronomical rates of interest.

Given that the Bank of England's base rate currently stands at an all-time low of 0.5% a year, you'd expect that the interest rates charged by credit and store cards would have tumbled, agreed? Alas, you'd be very wrong, as the following table proves:

The store-card Hall of Shame

Source: Moneyfacts, 03/04/09

Creation Account Cards can be used in: adamskids, All Saints, Allders, Ann Harvey, Carphone Warehouse, Clarks, Contessa, Designer Room, Dolcis, Ernest Jones, Faith, Focus DIY, H Samuel, HMV, JJB Sports, La Senza, Leslie Davies, Littlewoods, mk one, Millets, Nevada Bob's, Peacocks, Pilot, Quiz, Robbs, Room, Sainsbury's, Selfridges, T J Hughes & Vergo Retail.

Edge Card can be used in: able2buy, Babies'r'us, Comet, Ernest Jones, Halfords, H Samuel, Holiday Time, Interflora, Mesh, Reid Furniture & Toys'r'us.

Retailers are ripping us off

As you can see, of the 29 store cards listed above, only nine charge a yearly interest rate under 20% APR. The remaining twenty cards all charge between 23.9% APR (Russell & Bromley; Marks & Spencer) and a seriously extortionate 30.9% APR for the Creation Account. Across all store cards, the average interest rate for purchases is 25.5% APR, which is close to nine percentage points higher than a typical credit card.

Retailers argue that interest rates aren't so important for store cards, because balances are much lower. However, I disagree, and am very annoyed that these rates haven't come down, even after new rules introduced by the Competition Commission in May 2007. To me, if it looks, smells and feels like a rip-off, then it's sure to be one!

So, despite the best efforts of the government to bring down the cost of borrowing, store-card users still pay interest rates normally associated with loan sharks. Frankly, we at lovemoney.com think that this store-card scandal must be stopped -- with new laws to cap lending rates, if necessary. Likewise, if retailers want our business during this recession, then they'd better start treating their customers fairly right away!

Ditch and switch

The simple answer to this 'retail rate rip-off' is to pay off your store-card debts as quickly as you can. If this is going to take longer than, say, six months, then your best option is to transfer your store-card balances by using a 0% balance transfer. By moving your debts to a credit card which charges no interest for an introductory period, you can freeze your interest bill for more than a year.

My favourite Best Buy 0% balance transfer is the Virgin Credit Card, which offers 0% on balance transfers for fifteen months, with a transfer fee of 2.98% of the value of each balance transferred.

So, shoppers, I urge you to rise up. You have nothing to lose but your store cards!

Many thanks to Michelle Slade at Moneyfacts for speedily providing the above data.

More: Find cracking credit cards today! | Cut thousands off your credit-card debts| Three brilliant ways to borrow