Sainsbury’s Finance, a joint venture of Lloyds Banking Group and J Sainsbury PLC, has launched a credit card that enables consumers to receive benefits both at home and while traveling abroad.
Sainsbury’s Supermarket Ltd. is a major grocery store and petroleum merchant in the United Kingdom.
The Gold card is the third credit card the issuer has launched this year that offers both a low annual percentage rate and rewards. In April, Sainsbury’s Finance launched the Sainsbury’s credit card and Sainsbury’s Nectar card (see story).
The Gold card carries a £5 (US$8 or 6 euros) monthly fee, offers consumers a 9.94% annual percentage interest rate on purchases and balance transfers. Only 3% of credit cards issued in the UK have interest rates of 9.9% or lower for purchases, Stuart McKeggie, head of cards for Sainsbury’s Finance, tells PaymentsSource.
Additionally, holders of the MasterCard-branded card earn two Nectar points per £1 pound spent on Sainsbury’s purchases in stores, online and in its petrol stations. Cardholders also may earn one point per £5 spent on purchases outside of Sainsbury’s, both in the UK and internationally.
Nectar points are part of a generic, loyalty-based product that enables credit cardholders to earn points from various merchants, including Sainsbury’s and Amazon.com.
The card also includes travel insurance, which covers cancellations, emergency medical treatment and lost luggage. The insurance covers up two adults and six children younger than 16, or up to age 23 if they are full-time students, according to the issuer.
The Gold card also imposes no foreign-exchange or cash-advance fees, both in the UK and abroad. It also has advanced fraud protection, which helps reduce the risk of cards being declined while making purchases abroad.
Based on average card-usage patterns in the UK and abroad, the “average person will save an additional £16 in travel” fees, McKeggie says of Gold cardholders. And based on a typical £1,000 spend on a holiday, “a cardholder may save an additional £27,” he notes.
Sainsbury’s Finance developed the card because “we sought to create a new credit card to not only provides our customers with the best possible card currently available, but also to shake up the card market,” McKeggie says. “The Gold card has a range of attractive benefits that no other providers currently offer.”
Offering benefits for both home and international travel, however, may end up being a challenge for the issuer, Matt Simester, director of Auriemma Consulting Group in the UK, tells PaymentsSource. Issuers should careful not to offer too much in one product because the product may not have enough mass-market appeal, he says.
Issuers “don’t always need to be all things to all people,” Simester says.
The travel-insurance benefit, however, likely will win over consumers because “the average UK household pays £90 a year for travel insurance, and this card offers it for £60 a year,” Simester says. Plus, travel insurance included in a credit card package is “always ranked very high in what consumers like to see in credit card benefits,” he adds.
Sainsbury’s Finance is brave in offering a fee-based card, but many traditional card issuers most likely will follow suite, Simester says. And as long as the issuer makes it clear exactly what cardholders receive with the fee, consumer opposition should be minimal, he says.
Indeed, Sainsbury’s is “sending the message that the company wants to be more competitive in the UK market,” Simester says. And while it may take time for the company to compete with cards offered by Tesco PLC, another large UK grocery chain, Sainsbury’s will be a healthy competitor among traditional credit card issuers, he says.
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