Is the new Asda cash-back card a good deal?
By Emma Lunn
Supermarket Asda has launched a cash-back credit card as part of its new dedicated personal finance brand - Asda Money. It's making headlines as the only supermarket credit card to offers shoppers cash-back rather than loyalty points to be spent in-store.
But is it the best deal for consumers?
Asda is far from the first supermarket to offer a rewards card. Yet it's the first to let shoppers decide where to earn and spend their rewards.
The Tesco Clubcard, for example, accrues Clubcard points that must be spent at Tesco, while Nectar points collected on a Sainsbury's credit card can be spent only at retailers signed up to the Nectar scheme.
Asda's card, meanwhile, offers 1% unlimited cash-back on Asda shopping and Asda fuel purchases and 0.5% cash-back on all shopping outside of Asda. Cardholders can redeem their cash-back rewards monthly.
Other perks include 12 months interest free on balance transfers and a relatively competitive annual percentage rate (APR) of 14.9%. Cardholders also benefit from no cash advance fees when they purchase foreign currency via Asda Travel Money.
"Times are tough, and shoppers don't want complicated points schemes or rewards that don't translate into real everyday savings," said Kirsty Ward, head of Asda Money, in a statement.
Can you get a
better deal elsewhere?
Despite the perks Asda is touting, you may be able to get a more rewarding card from traditional issuers. First of all, the cash-back rate for non-Asda spending is low. Cash-back cards from American Express and Capital One, for example, both offer better rates with more flexibility.
The American Express Platinum Cashback card offers 5% cash-back (up to a limit of $2,000) on purchases made within the first three months of card membership and 1.25% after that.
That means a £250 monthly spend would earn £65.63 in cash-back a year, while the same spend on Asda's Money card (assuming the spending is done outside of Asda) would earn £15. Even with its £25 annual fee (the Asda card has none), the AmEx card still wins when it comes to cash-back earnings.
Capital One's Aspire World Mastercard, meanwhile, offers the same cash-back rates as the AmEx card and has no annual fee.
Other cards also have the Asda card beat when it comes to balance transfers.
"The 12 months 0% balance transfer deal with 2.9% handling fee capped at £3 is OK," reads an article from consumer group Which?. "But there are much longer offers currently available -- up to 22 months from Barclaycard -- if you are looking for a balance transfer credit card."
So why would
consumers choose Asda?
If consumers can get better terms from banks, why would they go with the Asda card?
Asda's launch into personal finance products comes at a time when confidence in banks is at an all-time low. Millions of RBS, Natwest and Ulster Bank customers suffered in June when a technical glitch delayed account deposits, leaving consumers unable to access their money. Meanwhile, Barclays has come under attack after some of its traders were caught rigging Libor (London Interbank Offered Rates) -- in other words, underreporting the bank's borrowing costs.
That presents supermarkets with the opportunity to scoop up loyal customers who got burned by big banks -- and sell them the same services banks generally provide.
If you get Asda's new card, keep in mind that it's still a credit card -- and that the same rules and dangers apply. Paying off the bill on time each month to avoid paying any interest is key when it comes to making the most of cash-back cards. Fail to do this, and you could find that any cash-back gained is wiped out by interest payments.
If you have a habit of carrying a balance, you're better off finding a card with a lower interest rate or with a longer introductory interest-free time period.
Published: 24 July 2012
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