What’s the verdict on supermarket banks?

These days you can get anything at your local supermarket – even your banking, but how do supermarket banks compare to their high street and online equivalents? To mark ten years since Sainsbury’s led the way by entering the UK financial services sector, moneysupermarket.com has analysed the impact of supermarket banks of shoppers’ personal finance – and their pockets.

When supermarkets such as Sainsburys and Tesco entered the financial arena, there was much fanfare about slashing the price of personal finance products. However, moneysupermarket’s Richard Mason says this is now a ‘distant memory’. Supermarket loans could cost more than double those available from best buy providers. This could cost consumers nearly £1,000 in interest over a five year loan term.

With credit cards, no supermarket offers a 0 per cent balance transfer longer than nine months, while in the open market there are 18 cards offering this rate for 12 months or longer. Switching to a long term deal could save a person £132 in interest over some supermarket credit cards.

There’s mixed performance when it comes to supermarkets’ offerings in car insurance, with Sainsbury and Marks & Spencer being quite competitive, while Asda and Tesco have ‘lacklustre premiums’ despite a 10 per cent online discount. With a best buy policy, a 35 year old male living in Birmingham and driving a Ford Focus 1.6 Zetec could save £207 on comprehensive cover. And supermarkets are even less competitive when it comes to home insurance, says the comparison site. Shopping around could result in savings of between 28 per cent and 50 per cent over the average supermarket home insurance policy.

Richard Mason said: ‘The early signs were certainly promising and there is no doubt that the new supermarket bank entrants forced the conventional players to improve their product offerings and become sharper on price. Supermarkets traditionally offer cut price deals in-store, but if you look across the financial markets they compete in now, the verdict is far more mixed, and in the majority of circumstances it pays to give those well-stocked aisles a wide berth in favour of better value providers.’