Is it Worth Shopping with a Loyalty Card?

Loyalty card schemes encourage shoppers to use particular banks or retailers by offering points linked to how much is spent. Points can be exchanged for money-off vouchers and other benefits, such as Air Miles. Loyalty cards are not credit or store cards.

The schemes have proved spectacularly successful. Britain’s most popular loyalty card, Nectar, launched in 2002, is used by more than 13million households. It allows you to earn discounts with a collection of High Street names, such as Sainsbury's, Debenhams, BP and Barclaycard. Other cards are run by just one chain, for example Boots and Marks & Spencer run their own schemes.

So should you join the loyalty scheme at your supermarket or high street retailer? The schemes have come in for criticism as being difficult to understand and compare, with many thousands of pounds needing to be spent before any meaningful benefit is won.

For example, consumers using a Nectar card get two points for every £1 spent. You also earn one point for every litre of fuel you buy at a BP petrol station. Nectar points can be exchanged for discount vouchers. However, to get a £2.50 Sainsbury's voucher you need 500 points, so you would have to spend £250. You earn more Nectar points if, for example, you use a Barclaycard to pay for the Sainsbury's shopping.

If you have a Tesco Clubcard you earn one point for every £1 spent. You can also earn points with a Tesco credit card. When you have 150 points or more, they are converted into vouchers. One point is worth 1p, so again you would need to spend £250 to get a £2.50 voucher.

You may also convert your points into Air Miles. You get 40 miles for every £2.50 voucher. A return flight from London to Paris costs 450 Air Miles, so to earn enough you would have to spend £2,814 at Tesco.

The most generous scheme is run by Boots. It gives its Advantage cardholders four points for every £1 they spend. Every point is worth 1p, which can be spent in the store. You need to spend only £62.50 to earn points worth £2.50.

Customers of House of Fraser earn two Recognition points for every £1 spent. When you have accumulated 1,000 you are sent a £10 voucher. You would get a voucher when you have spent £500, so this scheme, too, is more generous than those run by Tesco and Sainsbury's.

The loyalty scheme should not be confused with House of Fraser’s Recognition store card, a credit card which gives you three points for every £1 spent. Remember, however, that if you do not clear the credit card balance each month you will be charged annual interest on the remaining amount at 29.3%.

Marks & Spencer's reward scheme is tied to the company’s credit card. You earn one point for every £1 you spend in M&S on the card and one point for every £2 you spend elsewhere. Every point is worth 1p and is converted into M&S vouchers every three months. You get a £2.50 voucher for every £250 you spend in the store. The M&S credit card offers an initial interest-free period of six months, but then the interest rate you pay on any remaining balance is 13.9%.