Rotters in the loyal family

There are a lot of loyalty cards out there. But which offer the best value for you?

Loyalty has become a much-abused concept in the financial world. Usually all it means nowadays is that you take out a firm's credit card and stay loyal to it. Meanwhile, it screws you into the ground with excessively high charges. But every now and then a little flower blooms among the weeds and a credit card crops up which offers a marginally better deal to long-suffering cardholders.

Two providers have recently entered the fray, offering cards which give the cardholder money or other benefits back for every pounds 1 that he or she spends.

One of the new issuers, Bradford & Bingley, offers the best reward scheme of any nationally available plastic card, according to new research that has been carried out by Staffordshire University.

The survey looked at the cash value of loyalty points given by rival card suppliers. Bradford & Bingley topped the table with an award of pounds 4 for every pounds 100 spent. The stingiest card of the 20 rated is TSB's Trustcard, which gives its users as little as 20p for every pounds 100 they spend.

Professor Steve Worthington conducted the survey on behalf of Vauxhall, whose own GM Card came second. Professor Worthington points out that the TSB card has been in issue since 1978 and says it is now "showing its age".

He suggests that people who clear their card balance in full every month - and therefore pay no interest - should pick the card with the best loyalty scheme. For all other users, it is the interest rate charged on uncleared debts - the APR - which is most important.

"If you can afford to be a full payer, then the usage incentives are an extra bonus," Professor Worthington says. "But if you're taking revolving credit, then I think you should concentrate on the APR."

These annualised percentage rates show the rate of interest you would be paying if you borrowed a given sum on your card for a full year. These rates are supposed to make it easier to shop around and compare different card suppliers. However, contrasting one APR with another is actually far from a straightforward exercise.

Barclaycard, for example, has a tiered APR structure which charges you more interest the less you spend and which may vary from one month to the next. If you were to borrow pounds 299 in February, for example, you would pay interest at an APR of 21.4 per cent. But up your spending to pounds 500 in March and your APR falls to just 17.4 per cent. It is the amount you spend each month that counts here, not the size of your accumulated balance.

Janice Allen, of the National Consumer Council, warns that using cards with a loyalty scheme can lead to a flood of extra junk mail. She says: "Loyalty cards are more valuable to the issuer than to the consumer. They're giving vital information about your spending patterns to the retailer or the bank, which will allow them to target you with other offers."

Another trick to look out for is the introductory offer. Anyone opting for a new Birmingham Midshires Visa card would pay interest at a comparatively modest APR of just 10.9 per cent for the first six months. But as soon as that six months is up, cardholders are in for a shock as the APR then all but doubles overnight to 19.9 per cent.

Professor Worthington says: "After a certain time period, the teaser rate vanishes, and you're back up to the full rate of APR. It makes comparisons of APRs even more difficult because nearly everyone has got a teaser rate these days."

The Vauxhall survey also looks at non-payment cards. These are the cards which, rather than paying for your shopping, simply record electronically the loyalty points you have earned. Professor Worthington found the best card at Boots - which gives you pounds 4 for every pounds 100 spent - and the worst at Tesco, where your non-payment Clubcard earns you just pounds 1 per pounds 100 spent.

But using payment and non-payment cards together lets card users pull one trick of their own, thanks to a process called double dipping. Professor Worthington explains: "What many sharp people do is use one of each type of card, and therefore get two lots of points at one time. For example, if you were in a Shell garage you could use your non-payment Shell loyalty card, but pay with, say, a Goldfish card. You would get two lots of points on one transaction."

Worthington's research shows that the Shell card earns you points worth up to pounds 1.30 per pounds 100 spent, while the Goldfish card nets you another pounds 1 per pounds 100 spent. A bill of pounds 100, double-dipped in the way Professor Worthington suggests, could therefore earn you total points worth as much as pounds 2.30.