A decade on, what have the supermarket banks done for us?

Early fanfare of price cuts and innovation now muted

Ten years this month (February) since Sainsbury's became the first supermarket to enter the UK financial services arena, price comparison site moneysupermarket.com analyses the real impact of supermarket banks on personal finance shoppers' pockets.

Richard Mason, director at moneysupermarket.com, said: "A decade ago, Sainsbury's and Tesco strode confidently into the personal finance arena, with promises to shake-up the marketplace and compete aggressively with traditional providers".

"Their approach was refreshing, aiming to mimic their success in the groceries sector by simplifying and slashing the cost of a range of popular financial products".

"Alas, this clarion call to the financial services industry is all but a distant memory." So, ten years on, how do they compare now? [see comparison tables in notes to editors] Motor insurance While Sainsbury's and Marks and Spencer prove fairly competitive in the motor insurance stakes, Asda and Tesco lag behind with lacklustre premiums, despite all the supermarket banks offering motorists a 10 per cent online discount.

For example, a 35 year old male living in Birmingham and driving a Ford Focus 1.6 Zetec can get fully comprehensive cover for as little as GBP287 a year with esure (an excess of GBP250 applies).

This is a massive saving of GBP207 or 72 per cent compared to insurance from Tesco, which charges GBP494 a year for the same cover.

Home insurance It proves even more crucial for homeowners to shop around for their home insurance.

Analysis from moneysupermarket.com shows that by avoiding the supermarket banks, you could save yourself 28 per cent at least, and in some cases half the cost.

For example, buildings and contents cover for a three bedroom semi detached house in Southampton could cost you just GBP129 per year with HomeQuoteDirect (an excess of GBP100 applies).

The best deal on offer from the supermarkets comes courtesy of Marks and Spencer, which charges GBP164 per year for the same home cover (includes 10 per cent online discount), while Asda charges GBP259 - more than twice the price of HomeQuoteDirect's policy.

Savings Sainsbury's Bank's internet saver is the leading easy access account of the supermarkets, paying 5.5 per cent - but it fails to reach the 'top five' in the rest of the market.

HSBC's Online Saver offers 5.75 per cent AER, compared to the Tesco Instant Access Savings account at 4.1 per cent AER up to GBP3,000 or Sainsbury's Instant Access Saver at 3.9 per cent AER up to GBP2,500.

A person opening a Sainsbury's Instant Access Saver with an initial deposit of GBP1,000 and making monthly deposits of GBP200 thereafter could save an additional GBP40.95 in interest payments over the course of the year if they had opened the HSBC Online Saver account instead.

moneysupermarket.com urges savers to make sure they get the best return for their money and concludes that at present supermarket banks simply don't deliver.

Credit cards Shame on the supermarkets! Not one offers a 0 per cent balance transfer (BT) deal longer than nine months, bucking the trend of many other providers increasing their introductory offers.

With 18 zero per cent APR deals running for 12 months or longer, people can get a much better deal if they swap to a different provider.

moneysupermarket.com analysis shows if a person transferred GBP2,000 onto a Sainsbury's Bank credit card they would pay GBP132 in interest over the course of a year.

However, if they had transferred this debt onto the MBNA Platinum Plus they would not have paid a penny in interest over that time - a saving of GBP132 a year.

Loans Loan interest payments could cost you dear if you choose one with a supermarket bank.

Marks and Spencer's rate of 9.9 per cent is nearly double the 5.9 per cent from Masterloan.

And it makes a big difference: a person could save near GBP1,000* in interest payments over the term of a five year loan, if they switch their GBP7,000 personal loan with Marks and Spencer with a typical APR of 9.9 per cent to Masterloan at 5.9 per cent APR.

Overall verdict 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." moneysupermarket.com is a website where consumers can compare financial and insurance products, as well as mobile phones, broadband services and utilities and apply online.

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