Tesco Bank to axe current account interest
The Tesco Bank current account currently pays 1% interest on up to £3,000 and has around 240,000 customers.
But from 22 September 2020, the interest rate will be axed, following the Bank of England’s base rate cut to a historic low of 0.1%.
A Tesco Bank spokesperson, said: “During March 2020 the Bank of England decreased the base rate from 0.75% to its lowest ever level of 0.1%.
“Given this significant change to the base rate, we’ve reviewed our personal current account interest rate of 1% and made the decision to reduce this to 0%.”
In February this year, Tesco Bank stopped accepting new applications for its personal current account “as part of its repositioning to focus on the right products and services for customers”, according to its latest trading statement.
In February 2017, Tesco went against the grain to launch a current account offering 3% in-credit interest on up to £3,000, meaning savers could earn £88 interest over the year.
It was met with unprecedented demand, leading it to pause applications before re-opening the offer but with big changes to the eligibility criteria, plus guaranteeing to pay the 3% interest on up to £3,000 for two years only – up till April 2019.
The Tesco Bank debit card also doubled up as a clubcard so when used to spend in store at Tesco, customers received one clubcard point per £1 spend, rather than the usual one point per £4. For spends outside of Tesco, customers receive one point per £8.
Where should savers turn for in-credit interest on their current account?
There are a range of providers offering in-credit interest for current account customers, according to independent rate monitoring site, Savings Champion.
It lists Virgin Money, Nationwide Building Society, TSB, Bank of Scotland and Lloyds Bank in its best buy table for interest-paying current accounts.
Virgin Money’s Current Account offers 2.02% AER on balances up to £1,000. Interest is paid monthly and it can be opened in branch, online and by phone.
Nationwide Building Society’s FlexDirect Current Accounts pays 2% AER on up to £1,500. The interest rate reverts to 0.25% after the first 12 months and also falls to 0.25% if a minimum of £1,000 isn’t deposited each month during the first year. New customers can apply online but will be required to bring ID into branch to complete the application process.
The TSB Classic Plus account pays 1.5% AER on balances up to £1,500. A minimum of £500 must be paid into the account each month and you must register for internet banking, paperless statements and correspondence to qualify. It can be opened in branch, online and by phone.
The Bank of Scotland Vantage Current Account pays 1% AER on balances up to £4,000, 2% AER is paid on any part of the balance between £4,000 and £5,000. Balances above £5,000 don’t receive any interest. A minimum of £1,000 must be paid into the account each month, you must stay in credit and pay at least two different direct debits from your account each calendar month to qualify. Although customers can apply for the account online or by phone, you may be asked to go to branch to provide ID.
Lloyds Bank’s Club Lloyds Current Account also pays 1% AER on balances up to £4,000, 2% AER is paid on any part of the balance between £4,000 and £5,000. Balances above £5,000 don’t receive any interest. A minimum monthly deposit of £1,500 and a minimum of two different direct debits each month are required. If these conditions are not met, a £3 fee will apply and no interest will be paid for that month. It can be opened in branch, online and by phone.