Calls for greater transparency in credit card reward schemes

The credit card industry has dramatically increased its use of reward schemes, but research from Sainsbury's Credit Cards suggests many offer a poor proposition and it is calling for greater transparency around their value and how they can be used.

Analysis by Sainsbury's reveals that the number of credit cards offering a reward scheme has increased from 122 in 2005 to 190 in 2008 - a rise of 55.7%.

Furthermore, Sainsbury's Credit Cards research reveals that 51% of all credit card holders have a reward scheme linked to their cards but only 23% have actually claimed any rewards over the past 12 months. The main reason (42%) for not collecting them is that cardholders feel that the financial rewards are too small to bother with - indeed 35% of people who have credit cards with a loyalty scheme claim that the value of their rewards over the past 12 months has been under £25. In addition to this, 23% said they did not know how to claim them and 24% said the process for redeeming their rewards was too difficult.

Top Three Reasons for Non-Redemption

1. Financial Rewards Too Small

2. Redemption Process Too Difficult

3. Don't Know How To Claim Rewards

The Sainsbury's credit card offers Nectar points equivalent to 2% cash-back on Sainsbury's purchases. There is no limit to the amount of points customers can earn and these can be easily redeemed at a Sainsbury's checkout or any other company that is part of the Nectar scheme. Card holders can also receive Nectar points on non Sainsbury's purchases as well. A family spending £100 every week at Sainsbury's on a Sainsbury's credit card would receive £104 worth of Nectar points each year on this expenditure alone.

Donald MacLeod, Head of Cards at Sainsbury's said: "The credit card industry is increasingly using reward schemes but our research suggests that many of these either offer poor value or, because the rewards are too difficult to redeem, a false value. Consumers have a right to know what their credit card reward schemes are worth in pounds and pence and also how easy they are to use and redeem. The industry has a great deal of work to do in this area"