Tuesday, 19 July 2011

War of the supermarket banks




As Britons become more and more disillusioned with the big banks, supermarkets and high street retailers are increasing their selections of money products – but which is best?



Can you get a good deal on your finances at the same place you do your grocery shop? To find out, we've rated four supermarket banks to see how they fare.

0% credit card deals

Tesco: When it comes to 0% credit cards, Tesco has one of the top deals with the Clubcard Credit Card which offers 15 months on new purchases and nine months on balance transfers.

Furthermore, card holders can earn one Clubcard reward point for every four pounds spent on the card — even outside the supermarket.

Sainsbury's: If you want a card that carries 0% deals on both balance transfers and new spending, Sainsbury's offers 12 months on each which allows you to avoid interest on both new credit card spending and existing debt. Thereafter, the APR Representative is 16.9% or 15.9% for those with a Nectar Card.

Marks & Spencer: If you're looking for a card with a 0% period on new spending, M&S offers 15 months interest free — vying with Tesco for top spot on the best-buy tables.

While M&S does not offer a balance transfer period, the Tesco card comes with nine months interest free. However, M&S does offer a lower representative APR — 15.9% versus 16.9%.

The Co-operative: Although ethical bank Co-op does not offer conventional 0% deals, its Platinum Fixed Rate credit card charges 9.9% APR representative for five years. Long-term low rate cards could suit borrowers who do not believe they could pay off a debt within an introductory 0% period.

WINNER: Despite strong propositions from Sainsbury's and M&S, we would award to the top spot to Tesco. In fact, the Clubcard Credit Card is one of our favourite deals currently on the market.

Loans

Tesco: Despite a top credit card offer, the supermarket is not a market-leader for personal loans — offering 7.4% APR Representative on amounts between £7,500 and £14,999 compared with the best rate of 6.7% from Alliance & Leicester.

Sainsbury's: Within the personal loan market, Sainsbury's is one of the major players for amounts between £7,500 and £15,000. At the moment, it is offering 6.8% to those with a Nectar card. Bear in mind, it is relatively easy to obtain a Nectar card if you want to advantage of this deal.

Marks & Spencer: Marks & Spencer also offers competitive personal loan rates — currently 6.9% APR Representative if you borrow between £7,500 and £15,000. Although there are lower rates on the market, anything below 7% is nevertheless competitive.

The Co-operative: If you're looking to borrow between £7,500 and £14,950, the APR Representative is 9.9% which is far higher than any of the other options discussed.

In line with its ethical stance, Co-op promises the money you borrow will not come from profits associated with human rights abuses or unnecessary pollution.

WINNER: In our view, Sainsbury's deserves first place in this category. Despite the stipulation that you need to be a Nectar customer, this is easily overcome if you want to borrow at this competitive rate.

Rewards

Tesco: Tesco Clubcard points are one of the most well-known examples of reward and loyalty schemes.

At present, the store is running its double points promotion allowing you to earn two points for every pound spent. Doing a quick calculation, spending £50 in store or online per week would equal rewards worth £52 a year.

These points can then be redeemed against Tesco shopping or you could potentially triple their value (to £156) with Tesco Rewards. Under this scheme, you get a more favourable return on your points when you exchange them in certain restaurants, theme parks or get discounts on foreign holidays.

Sainsbury's: Like a number of other supermarkets, Sainsbury's shoppers can earn rewards for their shopping in the form of Nectar points.

Spending £50 a week at Sainsbury's (roughly £200 a month) would bag you £22.50 worth of points which could then be redeemed at retailers such as Sainsbury's, Argos and Vue Cinemas.

Marks & Spencer: Those with a credit card from M&S could earn rewards for their spending. If you spend £50 a week at M&S, you could earn £26 of vouchers a year to spend at the store. Furthermore, you earn rewards for shopping at other retailers other than M&S but spending £50 a week would bag you a measly £13 a year.

The Co-operative: Becoming a member of the Co-op entitles you to a share of the business' profits according to how much you spend and how well the company performs.

You can either choose to take your rewards as money or voucher — alternatively you could make a donation to local communities.

WINNER: According to our calculations, Tesco has the highest rewards potential. However, the best option for you probably depends on your spending habits so it might be worth checking out points calculators on the supermarkets' websites when choosing a reward scheme.

Insurance

In addition to banking services, the four retailers also offer a range of insurance products — each including home car and pet.

WINNER: Because your insurance quote will depend on factors specific to you, it is difficult to assign a winner in this category. If you are shopping around for a new policy, it's worth checking a range of quotes to make sure you get the best deal.

FINAL VERDICT

Coming top in both rewards and 0% deals, Tesco takes the crown of best supermarket bank. In addition the retail giant is planning to launch a range of mortgages later this year — the details of which remain to be revealed.

Nevertheless, there are competitive deals from both M&S and Sainsbury's while the Co-op deserves points for its ethical credentials.

Remember, interest returns and returns on rewards schemes vary depending on your circumstances so do your homework before applying for a new financial product from the supermarket or anywhere else for that matter.





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