Credit cards, loans, ISAs: how Tesco and Sainsbury's beat the banks

You’ll pay less interest on your borrowing or get a better return on your savings with the likes of Tesco and Sainsbury’s than the mainstream high street banks.

Another day, another market-leading deal is launched by a supermarket.

This time Tesco has slashed the rate charged on its larger personal loans, those of between £15,000 and £25,000. The supermarket giant now boasts a representative APR of just 6.9% for these loans, down from 7.2%.

Here’s how it compares with the rest of the market for large personal loans, using the example of a £20,000 loan payable over five years.

*Available to M&S credit card, storecard, current account or loan customers

So Tesco, Sainsbury’s and Marks & Spencer all outperform the vast majority of banks.

And it’s not just the large loan market where you’ll get a better deal on your money from the same place you buy your weekly shop.

Personal loans

The more competitive area of the personal loan market is for loans of between £7,500 and £15,000, with rates as low as just 4.8% if you can pay it back in three years or less.

The firm offering a loan that cheaply? Sainsbury’s.

And the table below looks at £7,500 loans, repayable over a five-year term. Look who's top again...

 *Available to M&S credit card, storecard, current account or loan customers

Once again Sainsbury’s, Tesco and Marks & Spencer all figure at the top of the best buy list. Evidently, if you need to borrow anything from £7,500 to £25,000, you could do a lot worse than borrowing from a supermarket.

0% credit cards

If you want to pay off a big purchase or existing debt in smaller chunks, then a 0% credit card may be the answer. These won’t charge any interest for a set period; and cards from supermarkets again figure favourably.

First, let’s take a look at the top 0% purchase credit cards:

So with Tesco’s card you can avoid paying interest on your purchases for a full year and a half, longer than any other credit card. Marks & Spencer once again appear in the best buy list too.

For more, read The best 0% purchase credit cards.

Now, what if you’ve already done the spending on your existing card and now need a little bit of breathing space? In this case a balance transfer credit card is your best bet – you pay a small percentage of the debt as a transfer fee, and can avoid interest for more than two years!

There is a wealth of choice when it comes to lengthy 0% balance transfer credit cards, with all of the cards in the table above offering at least 27 months free of interest charges. And once again we see a supermarket more than holding its own, with Tesco Clubcard Credit Card for Balance Transfers.

That said this is one area where the mainstream lenders may work out a little cheaper. For a full rundown of top balance transfer cards, check out The best 0% balance transfer credit cards.

However, it’s worth bearing in mind that all credit cards from supermarkets allow you to rack up loyalty points, whether it’s Clubcard, Nectar or M&S points.

Low APR credit cards

If you are likely to take longer than two years to clear your debt, or want to know that if you don’t manage to pay off your full balance every month you won’t be walloped with a massive interest charge, then you may prefer to go for a card with a permanently low APR.

And the some of the lowest APRs around come from two Sainsbury’s credit cards.

First off there’s the Sainsbury’s Bank Nectar Low Rate card. This card comes with a representative APR of just 7.8% – far below the 17-19% you typically see from credit cards. You also earn extra Nectar points based on the money you spend. In the first three months you'll also earn 10 Nectar points for every £1 spent at Sainsbury’s. After that it drops to four points for every £1 spent there. You also get one point for every £5 spent elsewhere.

Then there’s the Sainsbury’s Bank Cashback Low Rate Credit Card, which also has a representative APR of 7.8%. You benefit from 5% cashback on your Sainsbury’s shopping in the first three months (capped at £50 cashback per month). After that you earn £5 cashback each month when you spend at least £250 at Sainsbury’s and £250 elsewhere.

ISAs

Perhaps the first place you should put any surplus cash is in an ISA. That way you earn interest and don’t pay a penny in tax.

If you want to have immediate access to that cash at any time, then you will want an instant access ISA. And the best rate around come from Tesco, paying 2% on all balances over £1. To be fair, there are other accounts that also pay 2% and offer immediate access from Stafford Railway Building Society, Nationwide, Cheshire Building Society and Derbyshire Building Society, but it’s notable that once again Tesco is right there at the top.

If you can afford to give up a little access to your cash, then the 60-Day Notice ISA from Aldermore is worth a look, paying 2.10%.

More on borrowing and savings

The best 0% balance transfer credit cards

The best 0% purchase credit cards

The cheapest personal loans

The best Cash ISAs