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Tesco Clubcard credit card poses a real risk

Sarah Coles
Jul 27th 2010 at 6:00AM

Filed under: Credit Cards

The Tesco Clubcard credit card looks like stonking value for Tesco regulars. It offers a market-leading 0% on purchases for 13 months, and a host of other goodies for shoppers. Surely it's a no-brainer.

Except that in money-management terms it's a complete nightmare.

If you're after a 0% card for purchases and you're a fan of Tesco, you can't argue with the fact that this is a good deal. The rate lasts a month longer than its closest competitors, like Sainsbury's and Halifax/Bank of Scotland.

Kevin Mountford, head of banking at moneysupermarket.com says: "As you'd expect with a Tesco product, the range of additional rewards on offer are impressive, particularly for those shopping with them on a regular basis. Credit card customers can now earn Clubcard points when using their card for purchases at any outlet and can also benefit from additional points when shopping at Tesco. In addition to this, credit card users can also benefit from discounted Tesco travel insurance and no cash advance or handling fees on Tesco travel money. Clearly this represents an excellent package for regular Tesco shoppers."

So why is this such a worry?

The very things that make this such a great deal also make it a really dangerous product.

You are being given 0% on purchases, and being encouraged to use that card to pay for your groceries. You are likely to spend far more than you otherwise would, because you don't have to pay anything for over a year. At the same time, it means you are more likely to use your credit card for every-day spending - as a tool for making ends meet.

Let this become part of your usual household spending and you will find you still get through all your money in a month - you will just find other things to spend your cash on. At the same time you will also be building up a large debt with nothing to show for it.

At the end of the 13 months, you will suddenly have to find a way to pay for your groceries out of a budget that will suddenly feel far too tight, and at the same time you will have to start repaying your debt.

If you are a master of your finances, you can use the 13 month period to be putting the same money aside in a savings account, so you take advantage of all the freebies and bonuses on the card, and have a sizeable sum salted away to pay the bill at the end of the period - with interest.

However, if you're not completely on top of your finances, it pays to be aware of the risks you face by taking out a credit card to pay for your groceries.

But what do you think? Is this a great new addition to your wallet, or would it cause problems for your household finances? Let us know in the comments.

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