Supermarket Credit Cards Not All They Seem

Taking out a supermarket credit card may, in the end, prove to be a false economy, that’s according to new research from comparison site Moneynet.co.uk.

The research reveals that the loyalty bonuses offered by supermarket-linked credit cards are not enough to compensate for the high rates of interest charged. In many cases the rates of interest charged totally negate any benefits enjoyed through loyalty schemes.

Richard Brown, Moneynet.co.uk chief executive, said: “ 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.

“ 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.”

According to Moneynet, one culprit is Tesco, who currently dominate the UK’s supermarket industry. The supermarket giant currently offers a Bonus card that reimburses the customer with a twelfth of the interest accrued. However, the card’s interest rate more than ensures that Tesco are compensated for such generosity, with a rate of 12.9 per cent, almost double that of Capital One’s, Amex’s and Egg’s card’s, which offer a standard rate of 6.9 per cent.

Also, it appears that Tesco are not the only supermarket to offer a less than competitive credit card, with Mr Brown adding: “ 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.

“ 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.”

However, supermarket credit cards are not a false economy for all card holders. Those who clear their balance in full each month and who regularly shop at the supermarket with which they have their credit card, can enjoy some benefits in return for their loyalty. Marks and Spencer, for example, initially offer in effect two per cent cash-back through its card (although the rate drops to one per cent after three months), and this deal is as competitive as any other credit card on the UK market.

Alisdair Milton
10th May 2006

More UK Credit Card News
Try our feed