Sainsbury's sees credit card rewards declining

WM Circle Logo

By: Wise Marketer Staff |

Posted on August 31, 2009

Credit cards that offer a reward scheme are becoming harder to find in the UK with the proportion of cards offering a reward scheme having fallen by more than 11% during the past year, according to research from Sainsbury's Finance.

The study found that approximately two-thirds (66.8%) of UK credit cards now offer cardholders some form of reward, compared with 78.2% one year before.

At the same time, the rewards being offered are also changing, with cashback and shopping rewards decreasing while access to a points or miles programme being offered more often.

Reward type Cards offering
in 2005
Cards offering
in 2008
Cards offering
in 2009
Cash back 43 17 13
Shopping rewards 66 118 92
Points 22 35 42
Miles 17 14 18
Other rewards 23 67 68

Figure 1: Credit card rewards in 2005, 2008 and 2009
Source: Sainsbury's Finance

Sainsbury's suggests that this decrease in the number of rewards available may be a mistake for the industry, as consumers with access to reward schemes said they are taking greater advantage of them than they did one year ago, with 54% of cardholders with a reward scheme saying they claimed all or some of the rewards they earned during the past year, compared to only 23% one year before.

According to Craig Hunter at Sainsbury's Credit Cards, "The recession has made a lot of people reassess their finances, and it's great to see that people are starting to make the most of the rewards from their credit cards. But the credit card industry still has a lot of work to do, as 46% of consumers still haven't claimed the rewards they earned during the past year, often because of their view of the scheme they have. There is no point offering reward schemes if there is no perceived value, or if it is too difficult to redeem them."

Despite the average value of rewards earned over the past year being estimated at 79.33 (approx. US$130), the main reason for not claiming their rewards (cited by 17% of credit card users) was simply that the financial value of the rewards is too small.

A further 3% said that the redemption process takes too long, and 4% said that it was too difficult to redeem the rewards they had earned. This poor perception of credit card rewards may help to explain why 32% of credit card users have chosen cards that do not have loyalty schemes associated with them.

The reasons cited by consumers for not claiming the rewards earned via their credit cards - and the estimated number of consumers affected - were as follows:

  1. The financial value is too small: 17% (approx. 3.3 million);
  2. I could not be bothered: 7% (approx. 1.4 million);
  3. It was difficult to redeem the rewards: 4% (approx. 734,000);
  4. The redemption process is too long: 3% (approx. 631,000);
  5. Did not know how to redeem the rewards 3% (approx. 503,000);
  6. Other reasons: 14% (approx. 2.7 million).

Sainsbury's own credit card offering currently offers Nectar points equivalent to 2% cash-back on Sainsbury's purchases, redeemable directly at any Sainsbury's supermarket checkout (or with any other Nectar redemption partner). The card also provides Nectar points for non-Sainsbury's purchases at the rate of 2 points per 10 spent (equivalent to 0.1% cash back).

More Info: