Moneynet Warns Against Supermarkets Bid to Attract More Credit Card Users
As supermarkets step up their attempts to secure a bigger bite of the lucrative credit card market, online financial data comparison service Moneynet (http://www.moneynet.co.uk ) advises shoppers not to be seduced by loyalty schemes designed to encourage spending on the cards.
Research on credit cards (http://www.moneynet.co.uk/credit-card/index.shtml ) by Moneynet.co.uk reveals that the benefits offered by most of the supermarket giants do not compensate for higher rates charged on the stores’ cards when compared to many ordinary credit cards.
“Supermarket card holders who pile up debt on these cards while thinking they are getting a good deal from loyalty schemes such as bonus points or shopping vouchers are shooting themselves in the foot,” said Moneynet.co.uk chief executive Richard Brown.
Tesco, for example, offers a Bonus card whereby the account holder is repaid a twelfth of interest accrued on the card. But at 12.9 per cent (see table), the card is nearly twice as expensive as Capital One, Amex or Egg, which all offer standard rate cards at 6.9 per cent.
Likewise, Marks & Spencer’s points system delivers just one point for every pound spent in the store after the initial three month offer of two points per pound spent. In other words, card holders will need to buy £100 worth of goods in order to get just £1 back.
It’s a similar story with John Lewis (Waitrose), and with Asda – which charges one of the highest rates of any credit card at 28.8 per cent, returning just 0.5 per cent of every pound spent on the card.
“ASDA may offer some of the best food and clothing bargains in the UK but when it comes to its credit card offering, the retailer is far from a best buy,” said Richard Brown.
“Shoppers will have to spend £1,000 just to get a fiver back. In other words, the cost of a couple of boxes of cereal. Not that much of a loyalty bonus, when you think about it.
“Our advice to anyone not paying off their cards every month would be to shop with a low rate card, and ditch the supermarket credit card. The loyalty points just don’t stack up,” he added.
And there is no shortage of choice when it comes to good rate cards outside of the supermarket shopping aisles.
Halifax, for example, offers consumers a full year’s interest free period, plus three months’ zero interest on purchases. The bank’s offering remains the best option for parking a sizable debt, even with a 2% balance transfer fee.
For shoppers who are in control of their spending habits there are lots of excellent standard credit card deals on offer. Halifax’s Flat Rate card boasts a low rate of 5.9%, although it carries no interest free period. Amex, Barclaycard, Egg and Capital One are not far behind, all offering a rate of 6.9% and between 50 and 56 days’ interest free period.
SUPERMARKET CREDIT CARDS
Provider - Card Name - Std APR - Int Free - Bal Trans Fee - Intro Rate and Period
Tesco - Bonus Card - 12.90% - 56 Days - 2% Min £2 Max £50 - 0% until 01/01/2007 on balance transfers and purchases
Sainsbury’s - Advantage - 13.90% - 56 Days - None - 0% for 5 months on purchases and balance transfers
John Lewis/Waitrose - Partnership - 15.50% - 56 Days - 2% Min £5 Max £50 - 0% for 6 months on balance transfers & purchases
Sainsbury’s - Standard - 15.90% - 50 Days - None - 0% for 12 months on purchases and 5.94% until balance transfer repaid
Tesco - Clubcard - 16.90% - 46 Days - 2% Min £2 Max £50 - 0% until 01/01/2007 on balance transfers and purchases
M & S - &MORE - 16.90% - 55 Days - 2% Min £5 - 0% for 6 months on balance transfers
Asda - Credit Card - 28.80% - 56 Days - None - 0% for 6 months on balance transfers
Rates shown are typical and the rate offered to customers may vary depending on personal circumstances.
Each card offers additional benefits, some of which are shown below
Tesco Bonus - On each anniversary of the account opening a twelfth of the interest paid over the course of the year is refunded
Sainsbury’s Advantage - A booklet of money saving vouchers for use in Sainsbury’s stores
John Lewis - Earn points towards vouchers for use in John Lewis and Waitrose stores and at ocado.com
Sainsbury’s Standard - A booklet of money saving vouchers for use in Sainsbury’s stores
Tesco Clubcard - Earn points towards vouchers for use in Tesco stores or to collect airmiles
M & S - Earn points towards vouchers for use in Marks & Spencer stores
Asda - Earn points towards vouchers for use in Asda stores
Asda has asked Moneynet to make it clear that the APR of 28.80% advertised on its website applies only to applications for its store card made via the web site. For applications made via its store network customers will be offered either 14.80%, 16.80% or 19.70% if they are accepted for the credit card, and either 24.80% or 28.80% if they are turned down for the credit card and offered the store card instead.
Asda has told Moneynet that the rate of 28.80% APR advertised against their credit card on their website is for “regulatory reasons”.
For further information:
Consumer enquiries: 0208 460 2833/ Moneynet (http://www.moneynet.co.uk )
Richard Brown, Chief Executive, Moneynet 020 8313 9030
David Andrews, Director 01273 774109 / 07941 255855
David Andrews Media Ltd
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