Money Insider: Supermarkets shine over money products

The big supermarkets have been selling financial products for about 17 years and the keen rates and discounted deals continue to make them a popular choice.

With all the money products being sold online, or by phone, the overheads are less of a burden and that translates to attractively-priced financial services products frequently appearing in the best buy tables.

With no bank branches to maintain or the cost of extra "in-store" staff eating into profits, this "lean and mean" set-up gives the supermarkets a distinct advantage.

As well as keen pricing, there's the convenience factor, including free parking right outside the store, 24 hours a day in some cases – something that most high street banks can only dream of.

The advertising is slick and well-positioned, which ensures millions of weekly shoppers can't help but notice the display of money and insurance advertising staring them in the face as they pay for their weekly shop.

Whether you're looking for credit cards, personal loans, savings, insurance or travel money the shelves are stacked with top-value deals.

Credit cards offering reward points is a very strong product area built on the huge success of the Clubcard and Nectar loyalty schemes at Tesco and Sainsbury's, respectively.

It's easy to earn extra rewards for using store-branded credit cards when purchasing the weekly shop or filling the car. To give you an idea of the popularity of these promotions, Sainsbury's Bank awarded a staggering 2.3 billion Nectar points to its banking customers last year alone.

Unsecured borrowing is a particularly strong area with Tesco Clubcard heading up the best buys with the longest interest-free term for card purchases of 19 months, with Sainsbury's also a top-six player with 16 months.

Similarly, Tesco Bank and Sainsbury's Bank are also in the top 10 for zero per cent balance transfer deals at 30 months and 31 months respectively – just two months less than Barclaycard, the market leader.

Aside from introductory interest-free cards, Tesco and Sainsbury's both offer credit cards with the lowest standard interest rate of just 7.8 per cent APR and 6.9 per cent APR representative respectively– second and third in the best buys.

Supermarket banks are just as competitive in the personal loans space and have dominated the best buy tables over the last three years.

For loans of £7,500 and £10,000, Sainsbury's Bank charges just 4.1 per cent APR representative and shares top spot in the best buys with M&S Bank and Zopa.

The supermarket banks have always excelled at offering simple no-nonsense products and savings accounts is another area in which they fare well.

Whilst the top slots in the savings best buys tend to be occupied by the less well-known banks and niche financial players, both Tesco and Sainsbury's are never too far off the pace with their pricing, and frequently offer a better return than the main UK banking brands.

Tesco has recently launched its own current account, which looks a good all-round deal, with Clubcard points on debit card spending, a competitive overdraft rate and credit interest of 3 per cent on balances up to £3,000.

With Clubcard customers on the lookout for ways to boost their points balance, I can't help feeling that Tesco missed a trick by not offering an introductory incentive, of say, £100-worth of points.

There's frequently talk of challenger banks threatening the monopoly of the big banks, however it's the supermarkets that have the double whammy of huge footfall and simple, competitive product ranges.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk