Money Insider: Supermarkets: the real challenger banks

The supermarket banks have always excelled at offering simple, no nonsense products, and savings accounts is another area in which they fare well

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The big supermarkets have been flogging financial products alongside bread and booze for almost 18 years in the UK, and the keen rates and discounted deals continue to make them a popular choice.

With all the savings and loans being sold online or by phone, overheads are less of a burden and that translates to attractively priced deals which frequently pop up in the “best buy” tables. With no bank branches to maintain or the cost of “in store” staff eating into their profits, the set-up gives the supermarkets a distinct advantage.

As well as keen pricing, there’s the convenience factor – free parking right outside the store, 24 hours a day in some cases. That’s an attractive convenience of which  most high street banks can only dream.

Whether you’re looking for credit cards, personal loans, mortgages, savings, insurance or travel money the shelves are stacked with top value deals.

Credit cards offering reward points is a very strong product area built on the huge success of the Clubcard and Nectar loyalty schemes at Tesco and Sainsbury’s respectively. To give you an idea of the popularity of these promotions, Sainsbury’s Bank awarded an eye-watering 2.3 billion Nectar points to its banking customers last year alone.

Unsecured borrowing is a particularly strong area, with Tesco Clubcard heading up the best buys with the second-longest interest-free term for card purchases at 19 months, with Sainsbury’s Bank hot on its heels at 18 months.

Similarly, Tesco Bank and Sainsbury’s Bank are also in the top eight for 0 per cent balance transfer deals, both at 33 months – one month less than market-leading deals from HSBC and Barclaycard.

Supermarket banks have just as competitive personal loans and have dominated the best buy tables in the past three years.

For loans of £7,500 and £10,000, Tesco Bank charges just 4.1 per cent APR and is a top six player along with M&S Bank and Zopa. Tesco is also establishing itself as a serious player in the mortgage market, particularly for longer-term fixed-rate deals.

It is currently topping the best buys with 2.89 per cent for five years and a £195 fee up to 75 per cent LTV; and 3.59 per cent for five years and £195 fee up to 85 per cent LTV.

The supermarket banks have always excelled at offering simple, no nonsense products, and savings accounts is another area in which they fare well.

While the top slots in the savings best buys tend to be occupied by the less well known banks and niche financial players, both Tesco and Sainsbury’s are never too far off the pace with their pricing and frequently offer a better return than the main UK banking brands.

Earlier this year Tesco launched its own current account which offers a good all round deal, with Clubcard points on debit card spending, a competitive overdraft rate and credit interest of 3 per cent on balances up to £3,000.

Switching numbers have yet to be revealed, so it will be interesting to see what the take up has been like, particularly with many consumers seeing current accounts as a home for some of their savings.

There’s frequently talk of challenger banks threatening the monopoly of the big high street banks; however it’s the supermarkets that have the double whammy of huge weekly footfall and simple, competitive product ranges to really make a difference.

Looking for credit card or current account deals? Search here