Tesco Clubcard MasterCard halves its earning rate from December – a big blow

Tesco made a surprising announcement yesterday, via The Daily Telegraph of all places, that it is halving the earning rate on the Tesco Clubcard MasterCard from December 2015.

This is a sharp blow.  At present, you earn 1 Clubcard point for every £4 you spend on the card.

From December, this will drop to 1 Clubcard point for every £8 you spend.  Spend in a Tesco store will retain the current rate of 1 point for every £4.

In reality, it is even worse than this.  You actually earn 1 point for every £8 you spend per transaction.  Spend £7.99 and you receive nothing.  Spend £15.99 and you only receive 1 point.

Tesco Mastercard

Your average earning rate will be a lot lower than 1 point per £8 spent – how much lower will depend on the mix of high value and low value transactions on your card.  At the most extreme, if the only thing you charge to your card was £5 for lunch each working day, you would spend £100 in a month and earn nothing.

Tesco is doing this in response to a new European Union law which will cap the fees that Visa and MasterCard charge to shopowners at 0.3%.  This compares to the current rate of around 0.75%.  Whilst the credit card companies will still make money from customers who pay interest, those who clear their balance each month will now be generating only marginal revenue.

You need to think seriously now about whether the Tesco Clubcard MasterCard is for you.  It is difficult to compare it with other cards because we need to see how other issuers react to the new EU rules.  Tesco is very much an early mover.

Adjusting for the averaging down of transactions to the nearest £8, you will get – I guess – around 0.1 points per £1 spent.  That is poor.  Even if you always use your points for a Clubcard Boost deal at 3 times face value, you would still only be receiving 0.3p of value per £1 spent.

That is better than nothing, of course, but there may be cashback cards which can beat it.  The Asda Money Visa credit card currently pays back 0.5% of your spend although I doubt this is sustainable in the long-term.

There is nothing to worry about until December but the days of the Tesco Clubcard MasterCard being a great deal are numbered.

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