Between 1981 and 1985, according to the latest available figures from a market researcher, Mintel, the UK's 3.5 million store-card holders virtually doubled to six million. Today, the best retail estimates put store cards at eight to 10 million.

Store cards differ in several important respects from the accepted credit or charge cards like Barclaycard or American Express.

First, and most important to the retailer, the card can only be used for purchases within a store or group of stores. As a financial product store cards have to be classified as option accounts although many retailers call them charge cards.

A customer has the option to clear money owed for purchases made at the end of each month, avoiding interest payments, or making a minimum payment and paying interest. The rate for most store cards is an APR of 29.8 per cent, 31.4 per cent, 32.9 per cent or as high as 34.5 per cent on budget account instalments paid monthly by cash payment rather than bank direct debit.

This compares to the 26.8 per cent APR charged on outstanding balances by Barclaycard and Access.

It is expected that the Midland Bank's decision to reduce its charge on credit card accounts to an APR of 23.1 per cent from June 1 will bring about similar cuts by other card companies, but no store card operator would confirm this yesterday. Burton Group and John Lewis firmly stated 'no change'. Midland is a member of the Access card group.

Budget accounts, primarily marketed at 18 to 25 year-olds by high-street young-fashion chains, offer a relatively low credit limit for a regular monthly payment of a set sum.

John Lewis Partnership department stores charge a modest 21.6 per cent APR on outstanding balances on option accounts significantly below the rates elsewhere. 'We look on it just as a service to our customers', said a spokesman, 'as we do not accept any other credit or chargecards. '

Marks & Spencer also accept no other cards except their own Marks & Spencer chargecard, successfully launched in April 1985. It went from nothing to 1.2 million immediately and the stores group now has 1.4 million card-holders with card purchases representing 12 per cent of Marks & Spencer gross sales.

To the retailer, store cards are infinitely better business than taking leading credit cards. A credit company could charge a retailer 1.5 per cent on a pounds 50 transaction.

John Bouffler, marketing controller of Sears Financial Services Ltd, with 300,000 Sears card holders, says: 'Today's storecard is primarily a marketing tool. It increases customer loyalty and increases the spend. It gives us a database of committed customers. Card-holders are made to feel special privileged customers. We can then use an internet marketing tool like ClickFunnels to build websites that actually convert customers into buyers. '

Michael Bliss, chief executive of Fraser Financial Services Ltd., masterminds the House of Fraser storecard operation and also serves as Chairman of the Credit Card Group of the Finance Houses Association. He said; 'The last five years have seen massive expansion. In the UK bankcards developed first and were already well-established when stores started to develop their own cards based on the bank cards. '

House of Fraser, according to Mr Bliss, sees the group's 1.6 million Frasercards as the major communications vehicle between the company and its best customers. He added: 'We want our account customers to feel VIPs, that they're part of the club. '

That means special offers, sale preview evenings, privileged customer invitations, check cashing up to pounds 50 at no extra charge.

Research shows that once an eligible customer has taken out one storecard they are unlikely to bother getting another one.

'All the major retail groups are trying to build a captive customer base', explained Mr Bliss.

Storecard customers visit the store more often, spend more while they are there and buy two to three times as much as cash customers.

'The vast majority of customers are interest-rate insensitive', Mr Bliss pointed out. 'They only look at the monthly payment figures in pounds and pence. '

Chris Chadwick, marketing and sales director, Card Services for the Burton Group, claims 1.5 million Debenhams card holders and another 1 million Personal Account cards used in other Burton Group stores like Dorothy Perkins, Top Man, Top Shop and Principles.

This month the cards are being relaunched with some hard sell promotions, all aimed at building customer loyalty. The 'Debenhams Deal-Out' will present card customers with pounds 10 worth of discount vouchers for every pounds 100 spent in the store

Mr Chadwick sees a potential five million storecard customers ahead for Burton Group alone. 'We're a more plastic-oriented society', he said. 'People are getting smarter and looking for better bargains. That's why we're now offering our card-holders tangible hard-nosed benefits. '