10:09 01 May 2013
If you are a regular shopper in Sainsbury’s and want to get something back for your custom, a new launch credit card from the banking arm of the supermarket giant could be just up your street. As the name promises, the Sainsbury's Low Rate Cashback Credit Card offers money back on in-store spend – and other benefits too. So let's take a closer look.
What's the deal?
The Sainsbury's Low Rate Cashback Credit Card offers an eye-catching 5.00% cashback on Sainsbury's shopping (up to a maximum of £1,000 spend per month) – but only for the first three months.
The card’s underlying offering (which applies during the first three months and beyond) is £5 cashback a month, so long as you spend £500 a month, £250 of which must be in a Sainsbury’s store. In other words, you’ll get 1.00% cashback so long as you spend on these terms. You will also collect Nectar points at the standard rate when you spend.
But the card also comes with a low representative annual percentage rate (APR) of 7.8% (variable) on both balance transfers and purchases, making it the cheapest long-term low rate credit card on the market. Better still, if you have existing credit card debt to switch across, it doesn’t charge a balance transfer fee.
Who's it good for?
The Sainsbury's Low Rate Cashback Credit Card is best primarily for anyone who is a planning to spend a lot in Sainsbury’s within the first three months of getting the card. And then for anyone who will use the credit card in and outside the store – and would usually be collecting Nectar points.
On a separate note, the card is good for those with existing credit card debt and looking for the chance to switch it to a lower rate of interest without having to fork out for the fee.
Because the low APR of 7.8% is offered for the life of the debt, it's also a good option for those who know they would struggle to pay off their balance in full within a certain timeframe – as would be necessary with a 0% balance transfer card.
(The maximum interest-free timeframe is 26 months from Barclaycard but you will need to pay 3.1% of the balance transferred – and if you don’t clear it in this time, you will be hit with a whacking APR of 18.9% (variable). The deal is also unavailable if your debt is already on a Barclaycard.)
While the cashback may be competitive for the first three months, the maximum 1% you ‘may’ earn after that is nothing to write home about – and is also part restricted to spending in Sainsbury’s. This makes better deals are available such as the Barclaycard Cashback card, which offers 6.00% cashback for the first three months on your five biggest monthly purchases, no matter where they are made, up to a maximum value of £120. After that you earn 2.00% cashback on your top five monthly purchases and 0.50% on everything else. What's more, each year you'll get a 4.00% 'thank you' bonus on your top five purchases during the month you took out the card. But be aware there is a £24 annual fee and if you don't pay off your balance in full every month you will be hit with a variable APR of 24.8%.
And while the Sainsbury's Low Rate Cashback Credit Card appears to be good for those with existing debt AND looking to earn for their spending, it’s not that simple.
If you transfer a balance to the card (albeit for free) and continue to spend on it, even if you pay off that new spend every month, your new purchases will still incur interest from the date they were made until the date they are repaid. This is because, for as long as you have the debt you transferred sitting on the card, you haven’t actually ‘cleared your balance’. This tactic is not unusual – Tesco Bank does it too – but it does mean that, ideally, you should either use the card EITHER for new spending or for the balance transfer.
What's the verdict?
If your main objective is to transfer expensive credit card debt to a lower rate option and you don't want to pay a transfer fee, the Sainsbury's Low Rate Cashback credit card is a top choice. An APR of 7.8% compares very favourably to the average credit card APR of 17.32% and you won't find a better deal.
(The next best option is the Barclaycard Platinum Simplicity card which has a slightly higher APR of 7.9%, but offers no cashback.) But, as mentioned, if you take this route, only use the card for the purpose of clearing the debt.
Otherwise, the Sainsbury's card is a good deal for those who like the brand and regularly shop in Sainsbury's stores. And, while it's still advisable to clear your spending debt each month, unlike most cashback cards, if you don't manage to pay off your debt in full one month, at least you won't be penalised by a high APR.
Should you prefer to earn Nectar points rather than cashback, Sainsbury's Bank has also launched the Low Rate Nectar Credit Card which also has an APR of 7.8% and no balance transfer fee.
This option allows customers to collect up to five times the number of Nectar points normally earned on their Sainsbury's shopping for the first three months, equivalent to 5% off their bill (10 points per £1 spent). After the first three months, customers will receive an on-going reward of up to 2% (four points for every £1 spent) back on their shopping when used in-store in conjunction with their Nectar card.
When buying fuel at a Sainsbury's petrol station, you'll also earn eight points for every £1 spent in the first three months. And if you swipe your Nectar card at the till, you'll also get one point for every litre of fuel purchased.
And if that's not enough, you'll receive one point for every £5 spent on your credit card elsewhere.
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