Expensive store cards are even more necessary to avoid this Christmas - not just because of the credit crunch but because providers are already hiking up rates even further in time for the festivities, Moneyfacts has warned today. With Christmas just three months away, store cards from Karen Millen, Oasis and Principles have increased rates by up to 4.3%, now charging a whacking 28.9% APR on purchases.

Moneyfacts analyst Michelle Slade said: "Last year store card providers which charged more than 25% APR were told to warn customers that cheaper deals could be found elsewhere, leading to rates being cut. Now, just like on credit cards, rates have been increased.

"As everyone feels the pinch, many customers may be tempted by the offer of a discount on their first purchases. However, this could end up costing customers hundreds in additional interest.

"By also cutting the minimum repayment required, some customers may think it a good opportunity to reduce their monthly outgoings, but in the long run they will end up paying much more in additional interest."

According to Moneyfacts figures, if you paid the minimum repayment (£3.65) on a £500 balance held on a store card that charged at 28.9% APR, you would pay £565 in interest and it would take 11 years and nine months to clear the entire debt.

Ms Slade adds: "The economic downturn has seen stores' profits tumbling, so this can be seen as the latest move to make more money from customers. Anyone taking advantage of the offered discounts needs to make sure they pay their balance off in full, otherwise the latest Christmas must-have could end up costing you twice the price."

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