Tesco has slashed the Clubcard points offered on its credit card. But what are the best alternatives?
I’ve been a long advocate of the Tesco Clubcard Credit Card.
I first took it out back in 2009 before I got married, when it offered what was then a market-leading 0% interest on purchases for ten months. It meant I could spread the payments of paying off my wedding suits, the DJ and all the rest, and bag Clubcard points on top.
Back then, I did all of my food shopping at Tesco, so it made extra sense as I could enjoy even more Clubcard points on my spending.
And the Clubcard points I’ve earned since, long after the 0% deal finished, have been cashed in for all sorts, from cheap Christmas gifts, cutting the cost of a family holiday and free days out with my kids.
But the time has come to say goodbye.
It’s not me, it’s you
Until this week, I got five Clubcard points for every £4 I spent at Tesco, and one point for every £4 spent everywhere else. While we no longer do our food shopping at Tesco –for over a year now we have stuck with Morrisons, as the food quality is better and usually costs less than at Tesco – that reward on spending in alternative retailers meant we still got some nice rewards, particularly on big spending like my train season ticket or the new floors that we’ve had installed in our house this year.
But from 1st December, that reward for spending outside of Tesco has been slashed. I now earn one point for every £8 I spend elsewhere.
That’s a massive change, and has pushed me to think about which card to go for next. I have no doubt thousands of other borrowers are in a similar boat. So if, like me, you’re dumping Tesco, which credit card should you go for?
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The 0% options
Tesco has long been one of the most competitive lenders when it comes to 0% periods on new spending. The combination of interest-free borrowing and a reward when you spend is an enticing one. Right now you can bag a 21-month 0% period with Tesco.
But if Tesco is now not such a great option, where else should you focus?
One card worth a look is the Sainsbury’s Nectar Purchase Credit Card. Not only does it come with a 25-month 0% period, which is one of the longest around, but you also earn Nectar points on your spending.
In the first three months with the card, you get 2% of your Sainsbury’s spend back in Nectar points. That means four points for every £1 you spend with Sainsbury’s (dropping to two points after those three months) and one point for every £5 spent elsewhere.
The trouble is, I don’t shop at Sainsbury’s, so this card feels like a non-starter to me.
Then there's the Santander 123 Credit Card, which pays cashback on your spending. You get 3% cashback on transport spending (whether train tickets, petrol or diesel), 2% on spending at department stores and 1% on supermarket spending. The amount that you can earn is capped at £9 a month, while the card comes with an annual fee of £24 (rising to £36 from January). The 123 card also comes with a 23-month 0% period on spending.
For more, read The best 0% purchase credit cards.
Reward me!
However, I’m not in the market for a 0% card as I have no big spending on the horizon. I just want to get something back every time I spend. So what are my options?
The American Express Platinum Cashback Everyday Card is one option. You get 5% cashback in the first three months, capped at £100, followed by tiered rates of up to 1.25% depending on how much you spend.
[SPOTLIGHT]Alternatively there’s the American Express Platinum Card. This is slightly different, with a higher cap in the first three months of £125 (you still get 5% cashback) and then a flat rate of 1.25%, which doubles to 2.5% in your anniversary month with the card. It does come with an annual fee of £25 though.
If I don’t want to go for cold, hard cash then there’s the American Express Preferred Rewards Gold Card. You earn points on your spending which can then be cashed in for rewards. There’s one point for every £1 you spend, with two additional points when you spend with American Express Travel. What’s more, if you spend £2,000 in your first three months with the card you get 20,000 bonus points, worth the equivalent of £100.
The Preferred Rewards Gold Card is a little different as it’s a charge card, not a credit card. That means you have to pay the bill in full EVERY month, no ifs or buts. There’s also a £140 annual fee, though that’s waived in the first year.
I’m not much of a traveller, but if I did fly fairly frequently then going for one of the many air mile credit cards would be an option too. To see how they compare, read The best air mile credit cards.
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A common theme
The eagle-eyed among you will have spotted a common theme in the cards I’ve picked out as possible replacements for my Tesco credit card – they are all American Express cards. And there’s a good reason for that.
The reason that Tesco is cutting the rewards on its card so drastically, and why other reward schemes have also been pulled, is due to the cap on interchange fees which is coming in next week. These are charges paid by retailers to card issuers like MasterCard and Visa when a debit or credit card is used as payment. And the new cap will significantly reduce what fees can be charged, which in turn will dent the profits of card providers.
However, American Express-issued cards are not subject to the cap for at least the next three years. As a result, its already competitive line-up of rewards credit cards now look even more exciting!
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