Money: Get on the big dipper

If shoppers play their credit and loyalty cards right, they can be quids in. Steve Lodge explains the principles of 'double dipping'

Are you double-dipping, or even double-dipping-plus? The massive increase in store loyalty cards and credit-card loyalty schemes is prompting shoppers to play a "two-card trick" to double the benefit.

Double-dipping refers to notching up points on a loyalty card for your shopping and then paying for that shopping using a credit card that gives an extra benefit in points or discounts. Pay off that credit card bill at the end of the month - in effect getting an interest-free loan on the money - and, in marketing speak, you are double-dipping-plus.

Double-dipping can boost the effective discount on your shopping from, for example, 1 per cent for using Tesco's Clubcard to as much as 3 per cent (see table) - with this extra 2 per cent coming in the form of hard cash that can be spent anywhere. In this case, the extra saving from double-dipping could amount to close to a week's free shopping every year.

Steve Worthington, professor of financial services marketing at Staffordshire University, says: "This is about shrewd and sophisticated customers maximising the value they get."

Credit-card spending in supermarkets is increasing, says the Credit Card Research Group, and with 25 million loyalty cards now in issue much of this will involve double-dipping. Supermarket shoppers, it is said, are losing their traditional resistance to "borrowing to buy food" as they appreciate the additional benefits of using credit rather than debit cards.

Sainsbury is one supermarket that offers a double-dipping variation of its own. By combining a Sainsbury's Reward loyalty card with a Sainsbury's Visa card, you qualify for "double points" - in effect a discount of 2 per cent. Use the Sainsbury's card elsewhere, and you get points worth just 0.5 per cent. Shop in Tesco, for example, and you could earn 1 per cent on your Tesco's loyalty Clubcard and 0.5 per cent on your Sainsbury's Visa, to be used against future shopping in the respective stores.

Tesco's loyalty-linked payment cards work slightly differently. Holders of Tesco's Visa cards get points equivalent to a 1.5 per cent discount on spending in Tesco, 0.5 per cent outside. But they cannot use a Tesco Clubcard to get extra points at the same time. Likewise, Tesco's budgeting card, Clubcard Plus, replaces the basic loyalty Clubcard and gives double points. But it draws money direct from a Tesco interest-paying savings account, which you have to fund on a monthly basis.

Someone who instead used an Alliance & Leicester Money Back credit card with the relevant loyalty card would qualify for 1 per cent of shopping discounts as well as a 1 to 2 per cent cash rebate, depending on their overall spending this year. The first pounds 3,000 of spending on the card earns a cash rebate of 1 per cent, spending above this earns 2 per cent. The A&L rebates - which are paid out once a year in cheque form to be used as you like will be halved to 0.5 and 1 per cent respectively next year.

Likewise, Boots shoppers using a combination of Boots' Advantage loyalty card and the British Gas-linked Goldfish card can pick up Boots discounts worth a total of 5 per cent, or - by using the A&L card - 4 per cent plus 1 to 2 per cent of cash.

The A&L, Goldfish and Tesco credit cards all carry no annual fee, making them particularly attractive for those looking at double-dipping-plus" - paying off their bills in full at the end of each month to avoid interest. The Sainsbury's credit card is only fee-free so long as you use it 10 times a year, but this is hardly an onerous commitment.

A&L's Money Back card, which was launched earlier this year, has already proved highly popular, attracting more than 170,000 holders. It pays the same rebate wherever you shop. By comparison, both Sainsbury's and Tesco's Visa cards pay a lower level of points when you shop elsewhere. And these discounts can only be used against subsequent shopping at the supermarket issuing the card.

It is certainly worth picking up a free basic loyalty card for any spending you might do, and only people paying something for a credit card - either interest or fee - need to balance that cost against the enhanced benefit from double dipping. But it is more questionable whether you should choose your supermarket according to where you can get the highest total card discounts. A report by Which? magazine earlier in the summer, comparing the difference in prices between a shopping trolley of similar goods, suggests supermarket prices differ to a greater degree than the loyalty schemes available for spending in the different stores.

HOW TO DOUBLE DIP

Loyalty card (rebate) Payment card (rebate) Total discount

Tesco Clubcard (1%) Alliance & Leicester Moneyback credit card (1-2%) 1% store discount + 1-2% cash

Sainsbury Reward (1%) Alliance & Leicester Moneyback credit card (1-2%) 1% store discount/Air Miles + 1-2% cash

WH Smith Clubcard (2%) A&L Moneyback (1-2%) 2% store discount + 1-2% cash

Boots Advantage (4%) Goldfish (1%) 5% at Boots or 4% at Boots + 1% other

Tesco Clubcard (1%) Tesco Visa (1.5%) 1.5% in Tesco

Sainsbury Reward (1%) Sainsbury Visa(2%) 2% in Sainsbury's or Air Miles

Tesco Clubcard Plus (2%) Money can only come out of Clubcard Plus account 2% in Tesco's