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 28 August 2008 06:31 BST

Supermarket financial products offer 'bad value'

Thursday, 02 Nov 2006 11:07
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A number of financial products offered by Britain's supermarkets offer "distinctly bad value", consumer group Which? has claimed.

Following an assessment of six popular personal finance products now offered by non-traditional providers such as supermarket chains and the Post Office, the organisation concluded that at best, some deals offered only "average" value to consumers.

Which? is warning consumers that while supermarkets may offer them good value on their grocery purchases, they may end up paying over the odds for financial services such as savings accounts, loans, credit cards and travel insurance if they fail to shop around.

The consumer group's study found that the credit card offered by supermarket chain Morrison's represented the "worst value" for borrowing, attracting annual interest of £224, making the cost of borrowing £153 more than that payable on the flat rate online credit card offered by Halifax, which is recommended as a "best buy" by Which?.

The research found that even the cheapest supermarket credit card, which was offered by Tesco, cost borrowers £84 a year more in interest than the Halifax card.

Which? also warned that taking out loans from high street retailers could prove costly to consumers, with a £5,000 loan from Marks and Spencer described as "downright expensive" and costing borrowers £348 more over a three-year period than borrowing the same amount from the cheapest lender, the Moneyback Bank.

The Post Office's travel insurance package was also criticised, with Which? highlighting that its annual worldwide policy cost more than twice as much as that offered by the cheapest provider, Travel Insurance Web.

However, the consumer group acknowledged that some supermarket financial offers did offer consumers a good deal, including Sainsbury's internet savings account, which gives savers five per cent interest on their money.

The supermarket giant, along with rival Asda and Marks and Spencer, was also recognised for providing "good value" life insurance products.

Commenting on the results of the study, Neil Fowler, editor of Which? magazine, said: "Just because supermarkets offer good value on groceries, don’t assume this applies across the board."

"You can pay well over the odds for the convenience of picking up a financial product with your weekly shopping," he added.

Speaking yesterday ahead of the publication of the Which? study, a spokesman for Marks and Spencer, whose financial division was established in 1985, admitted that some of the personal loans it provided were more expensive than those offered by other lenders.

But James Thorpe insisted stressed that cheaper rates offered by rivals tended to apply to smaller loans, whereas Marks and Spencer focussed on the provision of larger loans, which were competitive due to the amount borrowed.

"At the lower values some of our competitors may be cheaper than us, but I would like to say that the vast majority of our loans are for higher sums and that is where we do most of our business," said Mr Thorpe.

Some of our APRs you might find are a little expensive, but certainly with larger sums we are competitive," he added.End of story


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