Do supermarket credit cards offer the best rewards?

Many of the UK's top supermarkets now offer their own credit cards. And if you only shop with one particular supermarket, they may seem like a good idea, as they offer more generous rewards and cashback to people who shop with them.

But are they really?

Let's take a look at what they offer, and how they compare to cards from mainstream banks.

Tesco
If you regularly shop at Tesco, the Tesco Bank Purchase Card with 1,000 Clubcard points (18.9% APR) is well worth a look. You'll collect 1,000 Clubcard points if you make a purchase or transfer a balance within two months of the account opening. You also earn Clubcard points for all of your spending, no matter where you do it. So you get five Clubcard points for every £4 you spend in store, and one point for every £4 spent elsewhere.

On top of that, you can take your time paying off your purchases. You can get interest-free purchases for 17 months, which is pretty competitive.

Unfortunately, you can't apply if you're a current Tesco Bank Credit Card holder so loyalty may not pay off here.

Tesco also offers a Clubcard credit card with a longer 19-month 0% period on spending, but there's no bonus 1,000 Clubcard points to enjoy.

Sainsbury's
Sainsbury's shoppers have a couple of options.

The Sainsbury's 18 Month Purchase and Balance Transfer Credit Card (18.9% APR) gives you double Nectar points on Sainsbury's shopping. You'll also pick up one Nectar point for every £5 spent on your card elsewhere. As the name suggests, it comes with an 18-month 0% period on both purchases and balance transfers.

Alternatively the Nectar Credit Card from American Express welcomes you with 20,000 Nectar bonus points when you spend £2,000 on the card in the first three months. You then earn two points for virtually every £1 spent on the card, which jumps up to four points for every £1 spent with Nectar partners.

This card has a £25 annual fee, but it will be waived for the first year. You'll need to have a household salary of £30,000 or more, while the APR sits at 25%. And bear in mind that American Express is not accepted everywhere.

Waitrose
For Waitrose and John Lewis shoppers, your best bet is the John Lewis and Waitrose Partnership Card. You'll earn one point per £1 spent at John Lewis and Waitrose and a point for every £2 spent elsewhere. Every 500 points you earn is worth £5 in vouchers. These are sent out every four months.

And if you apply and spend on the card before the end of May, you'll get a bonus 1,000 points, worth £10.

On top of that, borrowers can get interest-free balance transfers and purchases for six months. It has 16.9% APR.

Asda
The key selling point of the Asda Money Credit Card is its cashback. You earn 1% cashback on your Asda shopping and on Asda fuel along with 0.5% cashback everywhere else. You can also get 5% cashback when you take out a selected Asda Money Insurance product using your Asda Money Credit Card. The APR is 18.9%

There's interest-free purchases for six months, too. But there is a major caveat here: it only applies to purchases at George.com that are over £200. You can also enjoy 12 months of 0% interest in balance transfers.

Non-supermarket cards
If you're a bit of a drifter when it comes to grocery shopping, there are other credit cards that offer cashback on your spending, no matter where you do it.

The American Express Platinum Cashback Everyday Credit Card gives you a stonking 5% cashback for the first three months, capped at £100. After that, you'll enjoy 0.5% to 1.25% depending on how much you spend over the year. It has an APR of 19.9%.

Its sister card, the American Express Platinum Cashback Credit Card, offers 5% cashback in the first three months (with a higher cap of £125) followed by a flat rate of 1.25% cashback. This doubles to 2.5% for your anniversary month with the card each year, so long as you spend more than £10,000 in the previous 12 months. There is an annual fee of £25 to remember too.

Santander's 123 Credit Card pays 1% cashback on all spending at major supermarkets. It also pays 3% cashback on spending at petrol stations, on National Rail and TFL travel, and 2% on spending at department stores. What's more, it boasts the longest 0% period on spending around, at 23 months. Again, there is an annual fee to watch out for, this time of £24.

It's worth mentioning that as with all cards, the APR is merely the representative APR. Not all successful applicants will get the advertised rate. In fact, by law only 51% of successful applicants have to get it. To make sure you bag the best rate, you need a strong credit history.

Cash conversion
So how do these rewards translate into cold, hard cash. I'm going to compare the monetary value of cashback earned from supermarket credit cards to those earned from the other cashback cards based on £6,000 annual spending at your favourite supermarket (£3,000 on groceries and £3,000 on fuel).

As you can see, with our example the Nectar Credit Card from American Express comes out on top, though that is reliant on being able to shuffle some spending into the first three months in order to make the most of the bonus Nectar points on offer.

Otherwise, you will be better off with a straight cashback offer, even if you do all of your shopping in a single supermarket.

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