Is it safe to bank on those sceptred aisles?

Supermarkets offer tempting financial products, says Madeline Thomas. But buy the wrong one and you're on your own

When supermarkets burst on to the finance scene a decade ago, the traditional banks quaked. Suddenly the competition was coming at them from all angles and in many guises. With a ready-made infrastructure of stores keeping start-up costs to a minimum, the promise for consumers was chea- per, better banking.

That promise appears to have been broadly upheld, but there is a chink in the armour. When you load sometimes complex financial products into your supermarket trolley, you are buying without first taking advice. So if you later find the deal is the wrong one for you, there is no comeback.

The big two supermarkets – Tesco and Sainsbury's – have been consistently active in the personal finance market, offering lending, savings and insurance products, credit cards and even mortgages. Tesco's financial know- how comes courtesy of Royal Bank of Scotland; Sainsbury's Bank is more autonomous but works in alliance with HBOS.

The third main supermarket in this arena, Asda, doesn't have its own banking business as such but instead puts its name to products from third parties and takes a commission on sales.

On the face of it, their products and prices appear mainstream, with the rates charged by Asda, Sainsbury's and Tesco on credit card borrowing varying only marginally – between 15.9 and 16.9 per cent. Lisa Taylor, spokeswoman for financial-comparison site Moneyfacts, says standard rates in this market average just over 16 per cent.

But that doesn't tell the whole story. The introductory rates and balance-transfer deals offered by the supermarkets have attrac-ted shoppers by the million and can still offer great value to newcomers.

For example, Ms Taylor says Tesco's interest-free period of 13 months for balance transfers puts it firmly in Moneyfacts' "best buy" tables, while Sainsbury's at 10 months and Asda at nine are respectable enough. So far, so competent.

The killer punch for supermarkets, though, is their loyalty schemes, which they exploit to the full. Sainsbury's offers four points for every pound spent with the business by shoppers using its credit card alongside a Nectar card. Tesco offers five points for every pound spent with it. Both also award points each time their credit card is used elsewhere, bringing customers right back to them at bonus time.

It works because for so many shoppers, loyalty is a price worth paying. Those points can pay for family outings, air miles, holiday vouchers, car rental and gym membership. So with rates no worse than the main banks, and bonuses aplenty, no wonder millions have succumbed.

Kevin Mountford, spokes- man for price-comparison site Moneysupermarket. com, says Tesco and Sainsbury's have thrived in the banking world because they had good, solid products and a great understanding of their customers.

"The supermarkets have a big opportunity, with their ready channels to market and the ability to cross-sell to their own customer base. The challenge now is for them to be meaningful players in the open market."

Sainsbury's has started already. It ran a prominent campaign after the launch of its internet savings account (which pays 6 per cent gross) in June 2007. The account remains one of Moneyfacts' best buys. In fact, Sainsbury's has been voted the comparison site's most consistent savings provider over the past 18 months.

Ms Taylor says consistency is important because not everyone wants to spend hours on the internet comparing providers; they simply want to know which products are reliably good performers.

The supermarkets have also refined their business model, allowing far greater scope for cross-selling, as Mr Mountford explains. "You can see promotions at petrol pumps for car insurance, and they make great use of the checkouts, where people have more time to browse. But they have also become clever at communicating outside the supermarket environment, whether that is through loyalty points, for example, or external advertising."

But be warned: if the products you buy – particularly insurance policies – turn out to be problematic, don't cover you the way you expected, don't pay out or are otherwise unsuitable, it's your problem. Buying without advice means you are afforded no support from the Financial Ombudsman Service.

Asda is the one supermarket that offers protection policies only through an independent financial adviser, Lifesearch.

Matt Morris, policy adviser for Lifesearch, adds: "When buying from supermarkets, customers should be aware that they are tied to just one provider, so their product range is very limited and not particularly competitive on price either.

"Important products like income protection and family income benefit are not offered, nor will they offer to write the cover into trust [to reduce inheritance tax liabilities]. And if consumers buy the wrong product, they can't complain to the ombudsman because, without advice, it's the customer not the seller who is responsible."

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice