Tesco 18 Month 0% Interest on Purchases Credit Card

Written by Karen Bryan

tesco credit card smallAfter the withdrawal of the Aqua Reward Credit Card, which paid 3% casback on all purchases up to a maximum of £100 a year, I had a look at cashback credit cards offers. I didn’t find anything very alluring.

Then I had the idea that I might be better off going for a credit card which offered zero percent interest on new purchases. I could put the cash that I’d spend paying the full balance on the credit card each month into a savings account, where it would earn interest, until I paid off the full balance just before the end of the 0% interest period. I wanted a card with the longest possible interest free period. I thought if I could find a credit card which also had some kind of rewards, it’d be even better.

The most appropriate credit card for my requirements was the ‘Tesco Clubcard Credit Card for Purchases‘ which offered 0% interest in new purchases for 18 months, plus Clubcard points on spending. Shopping at Tesco (including fuel) earns extra Clubcard points. You earn 5 Clubcard points for every £4 spent in-store, compared to the standard 1 point per £1 spent. While on fuel purchases, you get 1 point for every £4 spent plus £1 for every £1 spent, equating to 5 Clubcards points for every £4 spent on fuel, compared to standard 1 Clubcard point per £2 spent.  You earn 1 Clubcard point for every £4 spent elsewhere.

We don’t do that much food shopping at Tesco, but the extra Clubcard points earned by paying with the Clubcard credit card would give us the equivalent of 1.25% of the purchase price in Clubcard points on fuel purchases.

If I put the total monthly spend on the Tesco credit card into our Santander 123 Current Account, then it’ll earn interest at the rate of 3%. Combining these two benefits of the ‘Tesco Clubcard Credit Card for Purchases’ will mean that I can beat my highest current rate of 1.7% cashback which I earn on a spend of £300 on my Halifax Clarity Credit Card.

However, once you factor in paying income tax on interest earned in a bank account, whereas cashback payment appears to be tax-free, the benefit of the interest free purchase credit card offer is diminished.

Using the Tesco credit card in this way will only be worthwhile if you are positive that you will be able to pay off the full balance before the end of the interest free period. Otherwise, you’ll start paying the standard rate of interest, currently 18.9% on the balance that has accrued over the previous 18 months.

Subscribe to our free monthly MON£Y SAV£R newsletter.