Martin Lewis Issues Caution on Supermarket Bank Schemes
Financial expert Martin Lewis has highlighted two products from Tesco Bank and M&S Bank that could benefit supermarket shoppers, but he emphasised the need for careful financial management when using them.
Listener Seeks Advice on Major Purchases
During a recent episode of his BBC podcast, Martin Lewis addressed a variety of money-saving topics, including optimising interest rates and handling dormant accounts. One listener sought guidance on purchasing a new iPhone and a television, with budgets set at under £400 for the phone and around £1,500 for the TV.
The individual considered using savings but was drawn to Buy Now, Pay Later schemes or zero percent credit cards to potentially improve their credit score. They also noted that their emergency fund was depleted after recent boiler repairs, making access to cash through borrowing appealing.
Core Financial Principle Stressed
In response, Martin Lewis reiterated a fundamental rule: "Saving up in advance is always generally the best way to go with the exception of people who are trying to play the system." He explained that saving beforehand allows you to earn interest from banks, whereas borrowing typically involves paying interest back.
For those opting for credit, Lewis advised being "very controlled" with finances and ensuring sufficient savings are available to clear any debt if necessary.
Recommended Credit Card Options
Lewis suggested considering a zero percent spending credit card from providers like Tesco Bank or M&S Bank, especially for individuals with decent credit scores. These cards offer rewards on purchases, such as:
- Tesco Bank: Earn Clubcard points—one point per £4 spent at Tesco, plus additional points for fuel purchases.
- M&S Bank: Gain rewards points—one point per £1 spent at M&S and one point per £5 elsewhere, with bonus points for early spending.
He outlined three key benefits of using these cards:
- Section 75 protections on purchases for added security.
- Rewards from the provider, enhancing value through points.
- Opportunity to place unused cash in high-interest savings accounts, a strategy known as 'stoozing'.
Risks of 'Stoozing' Strategy
While 'stoozing' can yield interest rates over 4.5% in some savings accounts, Lewis warned of potential pitfalls. "That is the perfect technique, but I hope everybody listening can understand the risk of it," he said. He cautioned that if not managed properly—such as failing to make minimum payments or facing emergencies—the strategy "can go wrong."
He reminded users to always pay off credit card balances in full and adhere to payment schedules to avoid financial setbacks.
