Sainsbury's is better than Tesco!

It's official: Sainsbury's offers better deals than Tesco!

You might think the battle of the supermarkets is all about which store offers the best deals on groceries.

You'd be wrong.

Tesco and Sainsbury's are now big players when it comes to credit cards, loans and savings accounts. Tesco even revealed recently that it would be launching a current account by the end of the year.

Not only are many of these accounts market-leading offers, if you choose a financial product with Tesco or Sainsbury's, you'll usually be rewarded with Tesco Clubcard points or Sainsbury's Nectar points as an extra bonus.

So, rather than doing the usual comparison of the stores by their top food deals and booze bargains (which we do every week in our Frugal Food blog), today, I'm going to take a more original look at which store offers the best financial deals. I'll also compare their loyalty schemes, so you can see where your spend at the supermarket will earn you the most bang for your buck.

Credit card offerings

If you’re looking for a better credit card for spending, you really don’t need to look any further than Sainsbury’s and Tesco. The chart below highlights two of their competitive credit card offerings:

Both the Sainsbury’s Finance Nectarcard Credit Card MasterCard and the Tesco Bank Clubcard MasterCard are offering market-leading deals - as they both offer 12 months interest-free on all new purchases. This means you won’t have to pay a penny of interest on that debt for the first year.

However, where they differ is for balance transfers. The Sainsbury’s credit card, for example, offers 12 months interest-free on all balance transfers, with a 3% fee. The great thing about this is that because the interest-free period is exactly the same for balance transfers and purchases, you will neatly side-step a nasty trick called negative order of payment.

• Watch our video: Don’t get caught out by negative order of payment

In comparison, the Tesco Bank Clubcard MasterCard only offers six months interest-free on balance transfers (with a 2% fee), so your debts won’t be treated exactly the same – and your cheapest debt (your spending) will be paid off last.

As a result, if you’re hoping to carry out a balance transfer as well as spend on your credit card, the Sainsbury’s Finance Nectarcard Credit Card MasterCard is the one for you. Do not use the Tesco Bank Clubcard MasterCard for a balance transfer if you’re going to be using it for spending. 

It’s also worth noting that the typical APR for the Sainsbury’s card is slightly lower at 15.9% than the Tesco card at 16.9%.

However, where the Tesco card beats the Sainsbury's card is in the rewards it offers. For every £4 you spend on the Tesco Bank Clubcard MasterCard, you will earn one Clubcard point. And when you use your card to spend at Tesco itself, the credit card also acts as a Clubcard. So as well as earning one point for every £4 you spend, you will also be able to collect points from Clubcard in the usual way (two points for every £1 you spend). 

In comparison, you won't be able to collect Nectar points directly from spending with the Sainsbury’s Finance Nectarcard Credit Card MasterCard - although you will need a Nectar card to apply for this credit card, so you will still earn Nectar points this way.

If your priority is collecting Nectar points, the Sainsbury's Nectar Credit Card might be a better option as it allows you to collect double Nectar points on all your Sainsbury's shopping for two years. You will also earn Nectar points when you use this card elsewhere - one point for every £5 you spend. The downside is that this card offers an interest rate of 12.92% on both purchases and balance transfers.

Overall winner: Sainsbury's, with the Sainsbury’s Finance Nectarcard Credit Card MasterCard, because it offers a straightforward 0% for 12 months on both balance transfers and purchases.

Super savings

Both Tesco and Sainsbury’s also offer some fairly competitive easy access savings accounts. Right now, the market-leading savings account is the Halifax Web Saver Extra which offers an interest rate of 3%, providing you’re an existing current account holder. Otherwise, the rate drops to 2.80% (note that you can only make one penalty-free withdrawal per year).

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In comparison, the Sainsbury’s Finance Easy Saver offers a lower interest rate of 2.50%, and you can only make five withdrawals in a year. Make more than this, and the interest rate will drop to 0.50%.

However, the advantage to this account is that if you're keen to collect Nectar points, and you can afford to invest at least £5,000 within 30 days of opening the Sainsbury’s account, and maintain this amount for two years, you can benefit from double Nectar points on your Sainsbury’s shopping.

Overall winner: Sainsbury's, with the Sainsbury’s Finance Easy Saver, because it allows you to double your nectar points.

Lovely loans

Tesco and Sainsbury’s are also pretty competitive in the loans department. The Sainsbury’s Finance Nectar Cardholder Personal Loan offers a market-leading interest rate of 7.8% APR for loans between £7,500 to £14,999. Again, you will need a Nectar card to apply for this loan, and you will receive double Nectar points every time you shop in Sainsbury’s for two years.

Tesco, meanwhile, is offering a loan at 7.9% APR for loans between £7,500 and £14,999. However, if you’re an existing Tesco loan customer, after you’ve made eight monthly payments, you’re eligible to apply for a top-up at a slightly lower rate of 7.8%. On the downside, there is no opportunity to collect Clubcard points with this account.

Overall winner: Sainsbury's, with the Sainsbury’s Finance Nectar Cardholder Personal Loan, because it offers the same, low rate to both new and existing customers, plus you get double nectar points.

Clubcard versus Nectar card

So now we’ve taken a look at some of the financial offerings by Tesco and Sainsbury’s, let’s take a look at how the Tesco Clubcard and the Sainsbury’s Nectar card compare. The chart below highlights four questions regarding each card, and the relevant answer.

So as you can see, you earn pretty much the same when you spend on either your Clubcard or Nectar card instore. However, while Tesco only allows you to collect points online in a couple of retailers, Sainsbury’s has 443 online partner retailers, according to Maxmiles.co.uk. So if you’re keen on your online shopping, the Nectar card may be preferable.

That said, when it comes to redeeming your points, if you want to spend your points instore, Sainsbury’s Nectar points are worth half the amount of Tesco Clubcard points.

As for spending your points in other places, both cards offer some great deals on travel, restaurants, and days out – and your points are generally worth more by spending them this way, rather than spending them instore. Here are just a few examples:

• 500 Nectar points is worth £5 off entry to a theme park such as Thorpe Park or Alton Towers
• 500 Nectar points is worth £5 off a meal at ASK restaurants
• Every £9.50 worth of Tesco Clubcard vouchers is worth a full entry ticket to Chessington World of Adventures
• Every £20 worth of Clubcard vouchers gives you an annual pass to Legoland Windsor.
• Every £2.50 in Clubcard vouchers gives you 60 Airmiles.

Overall, I’m going to sit on the fence a little here as I don’t think that one card is necessarily better than the other. However, it’s well worth checking out the Nectar card and Clubcard websites for further details about where you can redeem your points as there are a whole host of deals you can take advantage of, and ultimately it’s up to you to see which card you’re likely to find more useful.

Just bear in mind that while reward points may help to sway your decision if you're choosing between financial products, don't let this influence your decision too much. You should still ensure you choose the right financial product for your needs, and shop around fully before making your decision.

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