Credit cards offered by retailers are more popular than ever – but who benefits most from the loyalty scheme incentives attached to them? Is it you, or is it the retailer who’s reeling in the customers?
Many people base their choice of credit card on whether it offers a reward or cashback scheme. In fact, in our most recent survey, over a third of people said it was the main factor they considered when choosing their credit card.
At first glance, the benefits of a reward-linked credit card seem like a no-brainer – the provider gives its customers an opportunity to earn vouchers when they remain loyal to their brand. However, if you look a little bit closer, it seems some of these loyalty-scheme rewards may not be offering great value.
Every little helps…..
The Tesco Bank credit card is the third most widely-held among Which? members. However, I think their reward scheme offers a low rate of return when compared to other deals.
By using the Tesco Clubcard credit card (which doubles up as a standard Clubcard), you’ll receive five reward points for every £4 spent instore. If you were using a Clubcard on its own, you would receive four points for every £4 spent. Therefore, as 250 reward points is worth £2.50 in Tesco credit, the added benefit of holding the credit card equates to a cashback rate of just 0.25%.
Let’s compare that to a more generous reward scheme, such as the one from Debenhams which lets you earn three points for every £1 spent instore. Based on a redemption value of 500 points per £5 reward voucher, this works out as a 3% cashback rate on instore purchases, compared to Tesco’s 0.25%.
It makes me wonder – are peoples’ choice of reward scheme reflecting their shopping habits instead of the comparative value of the scheme?
Why don’t people prefer cashback?
I find it baffling that cashback cards don’t seem to be as popular as their reward card counterparts. After all, with a decent cashback card, you aren’t restricted to where you spend your money, or where you spend the cashback once you’ve earned it.
That being said, some loyalty point schemes do represent good value when you take advantage of their special offers. For example, Sainsbury’s Nectar scheme or Tesco’s Clubcard scheme regularly offer to double or triple the value of your points if you spend them on selected items or in specific departments. Of course, that’s only really useful if you want to buy something included in the offer.
Do you have a credit card that’s linked to a reward scheme? Do you think you get good value for money, or do they benefit the retailer more than you in the long-run?
