Sainsbury’s banking wind down: How will it affect your credit card, loan or savings account

Sainsbury’s has announced plans to gradually wind down its banking operations in order to focus on its supermarket business. 

The grocer’s banking arm offered a range of cards, loans and savings accounts, and its customers, of which there are around 1.9million, may be wondering what happens to these products now. 

We explain what Sainsbury’s plans to exit banking mean for account holders.  

Winding down: Britain’s second largest retailer has announced plans to gradually wind down its banking operations

Are there any immediate changes? 

Sainsbury’s said in a statement that there would be ‘no immediate changes’ for banking customers. 

It has not revealed a time-frame for the winding down of the business, but said it would tell customers about any changes to their products ‘well in advance’ of them happening.  

One option, according to the retailer, is that its financial products could be offered through third-party ‘dedicated financial services providers’. 

This would probably mean that the products would still be under the Sainsbury’s brand, but the business would be run by another company. Sainsbury’s already does this with its insurance policies. 

In August, Sainsbury’s sold its mortgage portfolio, which comprised 3,500 customers and balances of about £479million, to the Co-operative Bank.

Simon Roberts, chief executive of Sainsbury’s, said: ‘It’s business as usual for now at Sainsbury’s Bank and there will be no immediate changes to products and services as a result of today’s announcement.

‘We will of course communicate directly to customers well in advance of any changes to their products and services.’

There has been a question mark over the future of small and medium banks as they struggle to compete with larger competitors amidst fierce competition in the mortgage and savings market.

Tesco is exploring the sale of its bank, and Co-op is currently in merger talks with Coventry Building Society.

Should customers switch to a new provider? 

If you are a customer of Sainsbury’s banking, whether it is worth doing anything depends on what product you have.

James Blower, founder of website Savings Guru says: ‘If you have a credit card or loan, Sainsburys has been pretty competitive so, unless you can find a better deal, it may well pay you to sit tight.

‘If you have a savings account, it’s definitely worth looking around as, aside from a couple of good fixed Isa rates, there’s been better offers in the market and there’s a very good chance you could get a better deal.’

> Find today’s top savings rates using our independent best-buy tables 

However, anyone with a Sainsbury’s Isa should be aware that, as This is Money revealed, customers have been subject to interest penalties as rate rises are not automatically applied. . 

Blower continues: ‘Ultimately, I doubt anything will happen in the short term so there’s no need for customers to panic or take any action – but it’s well worth customers of the bank looking at their deal and seeing if it still is competitive. 

‘If not, it’s highly unlikely that they’ll be offering good deals going forward so do consider switching.’

Will Sainsbury’s Bank be sold? 

There are several options for the future of Sainsbury’s’ banking operations. The first of these is to sell the entire bank.

James Blower adds: ‘I think Sainsbury’s will be focused on selling the entire bank but it is unlikely this will happen, in my opinion, as I suspect most interested parties won’t want all of it – they’ll want the bits that they see as most attractive.’

‘Sainsburys will have loans on their book that are below current market rates and some long balance transfer deals which will be less attractive to buyers. There’s very few banks who will want the entire business.’

Another option is for Sainsbury’s to sell its banking division in parts, for example credit cards to one provider and savings to another. 

Blower says: ‘I think this is most likely the way it will go. However, it could take a year or even two to conclude this.’

Ultimately, if Sainsbury’s doesn’t find a buyer then it will need to close the bank down, which could run on for several years, so the third option for the future of its banking operations could be a managed winddown.

This post first appeared on Dailymail.co.uk