Loyalty schemes. Are they pointless?

loyalty cards smallSainsbury’s recently captured the headlines with its decision to halve the points your can earn on its Nectar card, so you have to spend twice as much to earn the same number of points as you did before April 2015.

But whatever plastic loyalty cards you have rattling around in the glove box, or the bottom of your shopping bag – there’s a much bigger issue here. The fact that loyalty doesn’t pay.
In fact, loyalty never paid but supermarkets (in particular) and other major retailers managed to trick us into thinking it did.

Loyalty cards explained

There are 3 ways that businesses encourage us to stay loyal using a small piece of plastic or card…

1. Traditional points-based loyalty cards

These are used by the traditional high street supermarkets and other retailers such as Boots. You get points when you spend and you can put these towards purchases either in store or online and via partner organisations. Nectar is probably the best known.

2. Credit based reward and cashback cards

These are credit cards where you earn rewards, or get cash back when you make purchases using them. One of the best known is the Santander 123 card, which offers 3% cashback on fuel, National Rail and TfL, 2% at department stores and 1% at supermarkets. Others offer points rather like supermarket loyalty cards, but sometimes at a better rate.

3. Paper-based local loyalty schemes

You pop into your local deli for a coffee and a bun and they stamp a little card to indicate you made a purchase. Fill the card with stamps and you qualify for a free coffee or similar.

card v2Does loyalty pay?

If you choose to shop somewhere just because you have a loyalty card you can use there, or you make a purchase somewhere simply because you can earn cashback on your credit card at that location, you could be losing money.
When it comes to credit cards, you need to be very aware of how much interest you’re paying, or if the promise of a cashback is encouraging you to make purchases beyond your means.
Low cost retailers like Aldi and Lidl show no interest in creating loyalty schemes, or loyalty lattes (aka Waitrose). Instead they rely on people shopping with them purely for the competitive prices.
The vast majority of supermarket loyalty card schemes offer a point for every £ you spend and a point is usually worth 1p. So if you spend £5 you get 5p credited to your loyalty card. This means that if you could buy the item even pennies cheaper somewhere else, using your loyalty card is actually costing you money.
Even the Santander credit card, which is accepted a large number of stores, won’t earn you cashback everywhere you shop. On larger purchases, at least, you should work out whether you can get a better deal elsewhere – without the cashback.

Points boosting

That said, sometimes there are special deals to be had. For example, 500 Nectar points will give you £2.5o when redeemed against your usual Sainsbury supermarket shop, but £3.75 (50% higher) if you redeem the points against a Pizza Express voucher via the Nectar website. There are other bonus offers to choose from.
And Tesco Clubcard points can be traded for Tesco Boost tokens which can be spent with other orgnisations and are worth up to 4 times as much as normal points spent in your Tesco store.

Why loyalty schemes should be paying YOU!

And every time you use a loyalty card to make a purchase you’re actually handing over loads of data about your shopping habits. This data is hugely valuable and you may be handing it over for pennies.
You can try manipulating the card issuers. Use your loyalty card regularly for a few weeks and then stop using it for a while (even if you still go to that shop). See if the offers and enticements you receive from the card issuer through the post change and get more enticing. Chances they will try to woo you back because they think you are no longer shopping with them.

Some tools for you to use…

Money Saving Expert has a Loyalty Checker that allows you to calculate the value of your personal stash of loyalty points or credit card rewards.

The most important question on any purchase is, where can I find the best deal? Use comparision sites such as: