My wallet is a card jungle. Whenever I go to pay for something I have to hunt for my debit card through loyalty card upon loyalty card. In fact, they far outnumber my credit and bank cards: there's one for my local supermarket, my chemist, my favourite computer games retailer, my taxidermist…
Now I use all of my loyalty cards and their benefits regularly (well, I use the taxidermist card far less since the credit crunch – at present I mainly use that loyalty card for scraping ice off my car), but how do you use yours?
Recent research from YouGov has revealed that 86% of us use our loyalty cards regularly, but 50% think it's a waste of time collecting points! Setting aside the obvious for one minute – why are you collecting points if you think it's a waste of time?! – this raises a valid question, what is the value of using a loyalty card? Is it worth it?
Why are we offered loyalty cards?
"Out of the goodness of the retailer's heart"… Err, no, loyalty cards are a way that big retailers use to monitor our spending and to then target us to spend more. We are rewarded for making purchases by collecting points which, at intervals, are converted into vouchers that we can spend at the store.
Top tips for using your loyalty cards
The Loyalty Card Credit Card
Some of the bigger loyalty card brands now offer you the opportunity to combine your loyalty card with a credit card. This will allow you to earn loyalty points wherever you spend (but at a much lower level than if you spend in the stores that the loyalty scheme originates from).
In order to maximise the benefits from these kinds of cards you need to be able to clear the balance in full each month. If you can't, any benefit you gain from loyalty points is going to be wiped out by the interest you will have to pay (unless this is in an introductory purchase period where you will need to clear the balance before the deal ends). If you don't think you would be able to clear the balance in time, a long 0% purchase deal card would be more suitable.
However, the loyalty card credit card may not reward you as well as you might think. Let's compare some of the top loyalty card credit cards against the top-paying cashback cards currently on offer. For the purposes of this comparison we're only including the points received for purchases made at stores other than the loyalty card's "home" stores.
Points/Cashback offer (excluding goods purchased in the loyalty card's "home" store)
Actual value of Points/Cashback on £1,000 spent on card
Sainsbury's Finance Nectar Credit Card MasterCard
1 point for every £5 spent (500 points = £2.50 to spend*)
Tesco Clubcard Credit Card MasterCard
1 point for every £4 spent
(1 point = £0.01 to spend*)
John Lewis and Waitrose Partnership MasterCard
1 point for every £2 spent
Capital One Bank World MasterCard
1.00% cashback plus a bonus £10 cash back each January
American Express Platinum Cashback Card
5.00% cashback for purchases made in first 3 months
After first three months 0.50% cashback on purchases
£50 for purchases made in first three months (or £5 if you made the purchase outside of this introductory offer)
* Cash equivalents of loyalty points are only available to spend in participating stores in the form of vouchers.
As you can see the cashback cards give more back to you than the loyalty cards on purchases made out of the loyalty card's stores. And of course cash has the advantage of being able to be used anywhere…
However, I should note that the American Express Platinum Cashback Card is only available if you earn £30,000 or more. Also, the loyalty points cash values are the standard values and do not take into account incentives such as Tesco's "The Big Clubcard Voucher Exchange" where the value of your points go up considerably more if you exchange your vouchers and spend in selected departments.
And, of course, this isn't the full picture with the loyalty card credit card. There is also the spending you do in the stores that are part of the loyalty scheme's group. This is where a loyalty card credit card can come into its own. If you do a lot of your spending at these stores, on credit cards, a loyalty card credit card can still work out as a cheaper alternative than a separate credit card and loyalty card.
Finally, the simple fact of a loyalty card credit card, does not mean that the card will be less or more competitive than other cards. If you are in the market for a new credit card, it's best to assess your new card as you would any other credit card. The Tesco Clubcard Credit Card for instance, currently offers the longest 0% purchase deal, at 13 months – in this context, if you're planning to make big purchases, the loyalty points are simply an added bonus!
Find the best credit card rates - Compare credit cards
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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