Sainsbury’s Finance, a joint venture of Lloyds Banking Group and J Sainsbury PLC that provides credit cards, loans, insurance and other financial products to consumers, last week launched two credit cards. Sainsbury’s is a major grocery store and petroleum merchant in the United Kingdom.
The Sainsbury’s Nectar card offers a 12.9% annual percentage rate on purchases and balance transfers, the issuer notes in a news release. Additionally, holders of the MasterCard-branded card earn double Nectar points when shopping in stores, online and at Sainsbury’s petrol stations for two years after opening the card account, the company notes. The extra Nectar points are equivalent to an additional 1% off cardholders’ Sainsbury’s shopping bills. For non-Sainsbury purchases, one Nectar point is earned on each full 5 British pounds (US$8 or 6 euros) of each separate transaction.
The other Sainsbury’s card offers a 0% annual percentage rate for the first 12 months, after which it rises to 15.9% or less on purchases and balance transfers. The Sainsbury’s Credit Card is only one of two credit cards offering an interest-free period on both purchases and balance transfers, Sainsbury’s Finance concluded after a March 2010 market analysis.
Neither credit card has an annual fee.
A representative from Sainsbury’s was unable to provide more details about the credit cards by PaymentsSource deadline.
To apply for both Sainsbury cards, consumers need to already have a Nectar Card, a generic, loyalty-based credit product that enables cardholders to earn points and receive discounts from various retailers, including Sainsbury’s and Amazon.com. The Sainsbury Nectar Card replaces the regular Nectar Card, which is being discontinued.
Sainsbury’s launched the two cards because of rising UK credit card interest rates, the company says. The average interest rate for credit card purchases in the UK is 18.2%, up from 16.3% in 2008, according to the UK Payments Council, whose research also found that 6% of credit cards come with an interest rate of 12.9% or less on purchases, while 32% offer 15.9% interest rates.
Sainsbury’s Finance estimates some 3.18 million consumers, or 7% of the UK adult population, are considering taking out a new credit card this year, while 1.18 million consumers plan to transfer up to 2.55 billion British pounds (US$3.9 billion or 2.9 billion euros) between cards. The UK Payments Council reported similar findings in its recent report, noting card payments should surpass cash payments for retail transactions by 2015 (see story).
Sainsbury’s Finance’s research found that only 30.8% of UK cards offer a loyalty scheme, including 12 cards offering cash back. Seven of the 12 offer cash back of less than 1%, and two of the seven cards also require cardholders to pay fees to have them.
In the grocery and department-store space, Sainsbury’s biggest competitors are Tesco PLC and Marks and Spencer PLC, notes Megan Bramlette, managing associate for Westbury, N.Y.-based Auriemma Consulting Group. Both already have strong credit card offerings, so it was wise for Sainsbury to launch the two cards, she notes.
“Because the retail and department-store space is a proven market, the two new Sainsbury’s cards definitely will resonate among Sainsbury’s customers,” Bramlette surmises.