Sainsbury's launches Nectar credit card
Sainsbury’s Finance has launched a new credit card that offers shoppers double Nectar points for two years.
The Nectar Credit Card has a typical APR of 12.9% on purchases and balance transfers. While it doesn’t come with any 0% promotional periods, as long as users pay off the balance in full each month then the additional Nectar points are equivalent to 1% discount off their Sainsbury's shopping bill.
The card can be used to earn extra points in store, online and in the supermarket’s petrol filling stations.
Sainsbury’s has also launched a second new card; the Sainsbury's Credit Card offers 0% interest on both purchases and balance transfer (3% fee applies) for the first year. After this time, both balances will attract interest of 15.9% APR.
Both cards are only available to Nectar card holders who have swiped these in store in the past six months.
Stuart McKeggie, head of credit cards at Sainsbury's Finance, says the new deals have been launched against a backdrop of rising interest rates.
Its own research found that the average interest rate on credit card purchases is currently 18.2%, compared to 16.3% two years ago. Meanwhile, only 6% of credit cards offer 12.9% or less on purchases.
“Over the past few months, the credit card market has seen interest rates rise steadily,” McKeggie says.
“Our strategy is very much focused around encouraging more Sainsbury's shoppers to take out our financial services products, and to do this we need to ensure that we continue to offer them exclusive deals that are extremely attractive.”
The launch follows other providers offering incentives to customers. In March, Barclaycard launched a new rewards scheme called Barclaycard Freedom, which allows cardholders to earn 1% cashback as they shop using their Barclaycard without the need to register to build up points.
Andrew Hagger, spokesman for comparison website Moneynet, says financial providers are keen to reward customer loyalty in an effort to encourage longer-term customer relationships.
"The new, extremely competitive deals from Sainsbury's offer a market-leading combination of introductory 0% purchases and balance transfers plus a tempting Nectar incentive," he adds.
How do they compare?
For Nectar card holders, the additional points they can build up by using the Nectar Credit Card could be a big draw. But this deal is only worth using if you are able to clear your balance each month – otherwise you will be charged interest.
There are also several options for shoppers looking for a credit card with a low rate of interest. For example, Halifax has a typical APR of 6.9% on purchases while Lloyds TSB charges 11.9% APR.
The second 0% Sainsbury’s deal compares favourably with other 0% purchase credit cards.
According to Moneyfacts, the best card in this category is currently offered by Saga – its introductory period is for nine months, after which time the typical APR in 11.9%.
However, if you have a balance to transfer, the best 0% deal is currently offered by Santander. It offers an interest-free introductory period of 15 months, subject to a 3% fee, after which point the typical APR is 15.9%.
Virgin Money, meanwhile, offers a 14-month introductory period (2.98% fee) with a typical APR of 16.6%.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.