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STORE cards seem, finally, to be dying out.

According to the Finance and Leasing Association (FLA), store card borrowing fell 20% in the 12 months to August 2011, a fall consistent with a broader decline in the deals' popularity over the past five years.

It's a considerable drop, considering only back in September 2008 Alliance & Leicester released research that revealed 1 in 4 people in the UK carried a store card.

In addition, in November 2011 the Government banned upfront store discounts which can make their cards initially appealing.

Only the store card providers are likely to be shedding tears, though. Here's why we're on the cheering side, and we think you should be too.

What makes a store card?

You've probably been offered a store card when you've been out shopping more than you realise.

They're often advertised near the till when you go to pay and shop assistants are frequently asked to offer them alongside your purchases.

Store cards share certain characteristics which separate them from debit and credit cards, primarily:

• Restricted spending power: you can only use a store card for purchases with the named retailer.
• Gifts and special offers: a money-off voucher, discount on your spending or gift (though, because of the new rules this won't be offered as soon as the card is taken out) is usually followed by a points scheme and occasional special offers for cardholders.
• Interest: unlike loyalty cards, where you just pick up points, store cards charge interest on purchases.

Many big name brands - Burtons, Debenhams and Topshop, for example - offer their customers store cards.

What's wrong with them?

High interest rates:

The interest rates on store cards are higher than those of the vast majority of credit cards: 25 - 30% p.a. variable.

High rates like that can easily increase the price of purchases significantly.

For example, spending £500 store card with a 29.9% APR and making average monthly repayments of £48 until the amount was paid back in full would rack up £74 in interest within 12 months.

It is worth noting, however, that store card providers claim that focusing on interest rates is misleading.

Fiona Hoyle of store card trade body the Finance and Leasing Association has that there is, "no evidence of consumers being unable to manage their spending on cards".

Hoyle claims one month that the average store card balance is just £2.80 and points out that credit limits are usually low.

However, low is inevitably a somewhat relative term in this case: if the consumer can't pay the balance back it's, by definition, too high.

Sold by untrained sales staff:

Despite those high interest rates, however, store cards are marketed to younger consumers and pushed hard to everybody.

A May 2010 survey commissioned by discount website Myvouchercodes.co.uk found that 51% of those questioned that didn't have a store card had refused one '10 or more times'.

Of the 564 survey respondents who did have a store card, 42% said that they had felt 'pressured' into signing up while 19% admitted that they applied without really knowing what the product was.

That statistic could also be a product of the fact that store cards are usually sold by retail sales staff who aren't trained to sell financial products.

The same study seemed to reflect that fact in other ways, too: 3 in 5 of those questioned admitted that they were unaware of the interest rates they'd be subject to before they signed up.

Amazingly, 59% even thought that store cards would enable them to 'shop now, pay later' without ever paying interest on their purchases.

Poor rewards

In addition, the rewards on offer are frequently of a poor quality.

Most of the mainstream cards now offer a 10 - 20% discount on cardholders first spend in the store on their new card but then little else in return for their customer's loyalty.

In that sense, store cards shouldn't be confused with retail reward credit cards, which are quite different beasts.

In recent years Tesco, Sainsbury's, Amazon, M&S and others have all turned their hands to financial services, releasing credit cards for their customers and often incorporating their own points schemes into the deals.

But these aren't store cards: they offer much lower interest rates comparatively, allow cardholders to spend on the card wherever they like and, crucially, they aren't sold at the till (generally speaking, see below).

See our guide for more information generally on credit card rewards.

Fees

To cap it all, store cards are more likely to charge certain types of fees than either debit or credit cards.

For example, store cards issued by Santander are currently the only card's to charge their customers a dormancy fee of £10 when the card isn't used during a six-month period.

Really worse than credit cards?

Having said all that, however, we're a credit card information site. Many of the cards we list have high interest rates and we're never so smug as when we spot that a big boast on rewards isn't quite what it seems, are store cards really so different?

Store card-alikes

It's certainly true that it's not so unusual for credit card providers to partake in the same questionable practices that we dislike in store cards.

The Amazon credit card, for example, is now sold in the same way that store cards are on the high street, offering a discount on customer's shopping baskets when they go to pay and we've certainly heard from a few consumers who have felt that they've damaged their credit ratings after making an application on impulse that wasn't really suitable for them.

The difference, we think, is that when these practices are the exception in the general credit card market, they're commonplace when it comes to store cards.

Grabbing the discounts

Some might argue that the main similarity, however, is that it's possible to spend on the cards to get some discounts (though not, as we discussed above, initial discounts) and then pay off in full within the interest-free period.

For those that are loyal to a particular brand this can be an efficient way to capitalise on spending and earn as many rewards as possible without changing spending habits.

Many store card users have also learnt to make the most of the discounts available to them by, for example, getting friends and family to make purchases when they have a discounted spend to get as much benefit out of the discount as possible.

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