Consumers appear to be wising up to the costs of borrowing on expensive store cards, a new survey suggests.

It comes as no surprise that credit cards are eating into the store card market

Datamonitor report

Market analyst Datamonitor said negative publicity surrounding the cards and a proliferation of cheaper alternatives were affecting demand.

In recent years, a number of big names, such as Marks & Spencer, Waitrose and John Lewis have cut their store card rates, but many retailers still charge as much as 31% to borrowers.

At the same time, new entrants have slashed the cost of borrowing on credit cards and personal loan rates have become more competitive.

In total, the store card market had declined by 5.8% in 2000 to 5.4% in 2001 with advances falling to �4.3bn as the volume and value of transactions on the cards has fallen.

Cheaper alternatives

Datamonitor said the average credit card interest rate undercuts the typical store card by almost 10%.

It added: "Add to this the widespread media coverage concerning the high prices charged by store cards, and it comes as no surprise that credit cards are eating into the store card market."

The report said point of sale credit, which includes credit such as store cards, mail order and catalogue credit, had also fallen.

During 2000, demand for point of sale credit fell by 5%, followed by a further 9% fall in 2001 with advances dropping to �12.9bn.

But Datamonitor said that the market for total point of sale credit would recover rising by 0.9% a year to reach �13.5bn by 2006.

However, it added that this would be well below the estimated growth rate of 6.5% a year for the consumer credit market as a whole.

Further information:

For credit card, personal loan and store card rates see link to Moneyfacts (on right).

If you need help with managing debt, there are a number of organisations which offer free advice (see Q&A: Managing debt, which is linked to this story).