Beware the store cards that punish you for not spending

When it comes to debt, store cards are notoriously bad. With rates of between 25% and 30% APR - compared with the average credit card rate of 16.9% - using your store card regularly and not clearing the balance each month could cost you dearly.

But it's about to get worse. Santander, the biggest store card issuer in the UK, has decided to penalise customers who don't use their card for six months or more by introducing a dormancy fee of £10 - which means they are penalising people who use their cards sensibly.

For more read: Why is Santander's service so poor?

"Dormancy fees are probably a reaction by card providers to a trend where consumers take out a card to make one discounted purchase, repay in full on their first statement and never use the card again," says Andrew Hagger, spokesperson for price comparison website

"If it's made clear when the card is taken out, then it's fair enough, but I'm not sure that's always the case. "

However, Susan Hannums, a spokesperson for Santander, says it would notify cardholders before making any charge. "We would always write to customers first offering them three options," she says. "We'd remind them of the card they hold and tell them that if they use the card within the next 30 days no dormancy fee will be applied.

"Alternatively, they can choose to keep the card, for the loyalty benefits, but not use it and accept the charge. Or finally, they may wish to close the account and no charge will be applied."

False advertisement

However, many store card holders are unaware of which company issues which cards. So if you receive an unsolicited letter from Santander but have no known dealings with the lender, you might be tempted to disregard it, thinking it's just another sales letter.

Defending the provider's move, Hannums says: "As store cards are not designed as a deposit-taking facility, it's our overriding priority to contact the customer to organise the repayment of any credit balance to them as soon as possible.

"While we make every effort to do this, it can occasionally prove difficult to obtain a response. It's for this reason that we reserve the right to charge a fee, which will never exceed the account balance and is capped at £10."

This is not the only sneaky fee on Santander's store cards, however. Along with the dormancy charge, several of the lender's store cards, including the Debenhams store card, penalise customers who have a balance on their cards for three consecutive months.

This is on top of the massive amount of interest they pay on the balance. Plus there already exists a standard £12 penalty for missing payments.

While charges like these are common on most store cards, Santander is currently the only provider to charge a dormancy fee.

Other store card issuers such as M&S Money (M&S, Home Retail Group, Argos); Ikano (Coast, Ikea, Jaeger, Karen Millen, New Look, Oasis, Warehouse and Habitat); and Creation Financial (Allders, Brantano, Joplings, Quiz, Selfridges and USC) all say they have no plans to introduce one.

Understand before signing up

While clearing your store card each month is very much recommended, it may not always be possible. Under these clauses, only a customer who regularly uses their card but always clears the balance each month can be assured of no extra charges.

"Before signing up to a store card, make sure you understand all the costs and charges involved. Ask yourself if you can really afford it," recommends Citizens Advice spokesperson Laura Burnell.

Dormancy fees: are you affected?

Santander issues store cards for the following high street shops:

Dorothy Perkins
House of Frasier
Laura Ashley
Miss Selfridge
Russell & Bromley

Your Comments

a problem that i have found is when cancelling a card either over the phone or in writing ....the card is not actually being cancelled leaving you thinking all is well but actually you are left with a dormant card.
Several of mt friends are unaware of the importance of actually cancelling the card and just cut theirs up assuming it is cancelled... maybe this point should be highlighted when actually taking out a card

My wife took a debenhams card out last october in meadow hall to get a discount on first purchase. no one told us about this dormancy fee when she signed up. now after your article i have read the small print and there it is. we are fortunate that we pay our balance off but we are not regular users.
This is a sneaky way to make money .
We are cancelling the card now. This is typical of santander. they are bnot trustworthy in previous dealings.

I got this card for my daughters wedding in August and have just by chance  used it again this week. I have it setup for full payment. Once the payment had been made I will definately cancel the card as I don't shop in Debenhams that often.