Store card providers who charge interest rates higher than 25 per cent will have to warn customers on monthly statements that cheaper credit may be available elsewhere, the Competition Commission announced yesterday.
Further "wealth warnings" will include options to pay by direct debit and more and better information on all monthly statements.
The measures follow a Competition Commission inquiry which found customers were being overcharged by at least £55 million a year.
The watchdog said on average store card interest rates were between ten per cent and 20 per cent higher than if they simply reflected the providers' costs.
It also found a lack of competitive pressure in the £4.8 billion sector on either the annual percentage rates (APRs) charged or the cost of associated insurance.
A lack of transparency in the provision of credit and insurance leads to cardholders taking credit and insurance on terms which are not clear to them, the watchdog said.
The Competition Commission said it will become mandatory for the current APR, an estimate of monthly interest payable and a "wealth warning" of the consequences of failing to make a payment to be prominently displayed on the front page of statements.
A "how to pay" section will explain to customers how to set up a direct debit.
Offers of payment, purchase and price protection will have to be clearly shown as three different types of insurance on statements.
The measures are expected to come into force in 12 months. There are more than 11 million store cardholders with outstanding balances totalling more than £2 billion, the watchdog found.
Although most people take out a card because of retail benefits, such as discounts, instead of the credit offered, some 57 per cent fail to clear their balance in full each month.
The numbers of active store cards have been declining - there were 11.4 million accounts at the end of 2005 compared with 17.5 million at the end of 2002. But the CC said they will continue to be important for retailers as marketing tools and for providers as a route to market financial products.
Christopher Clarke, deputy chairman of the CC, said: "The store card market is changing but remains an important source of credit and associated insurance."
He said many APRs were clustered around 30 per cent with little incentive to change them.
Even by the end of 2006, more than 90 per cent of store card accounts are projected to pay APRs of more than 25 per cent, he said.
Around 70 retailers offer store card services, with the majority operated by six card issuers, including General Electric Consumer Finance and HSBC.
Ashley Holmes, head of legal affairs at the Finance & Leasing Association, which represents most store card issuers, said his members were cooperating fully with
the findings but the body still had its concerns.
"At first sight, the APR warning notice appears to be an attractive, simple transparency measure. But we are concerned that it may really be a back door cap, harming vulnerable consumers," Mr Holmes said.
This virtual rate cap might mean credit being denied to some consumers who would then be forced to seek loans at even higher interest rates.
The investigation into store cards was launched in March 2004 at the request of the Office of Fair Trading.
Most of the remedies were originally floated in September last year when the "excess" profits were reckoned to be closer to £100 million.