Money Insider: Sainsbury's gold card is a winner despite £5 fee

despite record amounts of credit-card balances being written off as bad debts, there are still some excellent and different new cards coming on to the market this year.

More than £4bn, equivalent to 10 per cent of the total balances on Britons' cards, was written off by lenders last year, with a further £3.5bn of bad debts struck from balance sheets in the first six months of 2010.

Whil there is still a plethora of 0 per cent balance-transfer deals on offer, the reality is that you'll need a top-notch credit record to have any chance of being accepted for these cards. Lenders have found that the 0 per cent introductory strategy does not encourage customer loyalty and, hence, we have started to see a new type of plastic on offer in an effort to build longer-term relationships.

In early July, Halifax launched its Clarity card which has a low annual percentage rate (APR) of 12.9 per cent for both purchases and cash transactions and no fees on foreign transactions or withdrawals from cashpoint machines overseas.

This week, Sainsbury's Finance also made a bold move by launching a new gold card with a £5 monthly fee. I can imagine many readers will take a sharp intake of breath and shake their heads at the thought of paying for a credit card. However, before writing it off as a nonstarter, take a look at what is on offer.

Even though it is a gold card there is no minimum income requirement. The interest rate on purchases of 9.94 per cent is almost half the average market rate. There are no fees to pay on foreign transactions, to with most cards normally add between 2.75 per cent and 2.99 per cent to the cost of your purchases.

Similarly, there are no withdrawal fees if you use the card in an overseas "hole in the wall", again saving you about 2 per cent to 3 per cent in fees.

But, unlike virtually all other cards on the market with the exception of Saga, you will not be charged interest on cash withdrawals as long as you repay your statement balance in full.

The biggest benefit with the Sainsbury's gold card is free comprehensive travel insurance, which is easily worth more than the £60 in fees you will pay on the card over a year.

The insurance is a worldwide annual policy covering a family with up to six children and includes winter sports. The card also offers double Nectar points to Sainsbury's shoppers, too, so overall you are looking at a good all-round package.

While there is no short-term incentive offered with the card, there is definitely long-term value, particularly for people who travel abroad regularly. Also £5 a month looks cheap, particularly if you compare it with some packaged current accounts that charge two or three times this amount.

Always look at a deal's set-up costs

the mortgage market may be in the doldrums but that doesn't mean competition has waned for what little business is still there. In fact, lenders are feverishly trimming rates to get best-buy exposure and win new custom even if on finer profit margins.

But as rates are tweaked by just 0.01 per cent in some cases, borrowers must look at all the costs involved. Lloyds TSB has a new "market leading" rate of 2.94 per cent (up to 70 per cent loan to value) for existing current account holders, fixed for two years.

This looks better than those at Yorkshire Building Society and ING Direct, both of which offer 2.99 per cent (to 75 per cent LTV). However, their fees, at £495 and £945 respectively, are dwarfed by Lloyds TSB's product fee of £1,895.

On a 25-year, £150,000 mortgage, the difference between a rate of 2.94 per cent and 2.99 per cent is £3.90 a month, or £93.60 over the two-year fixed term, whereas the fee charged by Yorkshire BS is £1,400 cheaper.

Taken another way, if you opted for a mortgage rate of 3.67 per cent with a £495 fee, the overall cost would work out much the same as the 2.94 per cent and £1,895 combination from Lloyds.

Fewer lenders are offering products via the intermediary market and the danger is that such a strategy will see an already depleted brokers' market suffer further.

Andrew Hagger is a money analyst at Moneynet.co.uk