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Tesco guarantees 3% on up to £3k till 2019 AND you can open two accounts

Written by: Paloma Kubiak
Tesco Bank has “gone against the grain” by announcing current account customers will receive a guaranteed 3% interest on balances up to £3,000 for two years, and you can open two accounts.

From 1 April 2017 until 1 April 2019, Tesco will pay 3% AER/2.96% gross variable credit interest on its current account for balances up to £3,000.

It confirmed this will apply to both new and existing customers and while the rate is variable, it will not drop below 3% AER during the two-year period.

While the guarantee is for its current account, Tesco confirmed there are no minimum direct debit, standing order or monthly pay in requirements. Plus, customers can open two current accounts, doubling the benefits.

Over the course of the year, customers with one Tesco current account could net £88, but Tesco has also upped its offering on Tesco clubcard points which it said could earn customers up to £316 over the next two years.

The Tesco Bank debit card doubles up as a clubcard so when used to spend in store at Tesco, customers will receive one clubcard point per £1 spent, rather than the usual one point per £4. For spends outside of Tesco, customers receive one point per £8.

The news comes just a day after Halifax announced it is set to scale back its current account switching offer (from £100 to £75) from March and following recent research which found that cash perks to tempt current account switchers are disappearing.

How good is this?

Andrew Hagger, independent personal finance expert at Moneycomms, said this positive move will be welcomed by customers seeking a decent return on their current account credit balances.

“It’s been a dismal few months, with many of the previous best buy in-credit and reward deals being slashed. Many customers were probably anticipating a similar rate reduction from Tesco Bank but refreshingly it’s gone against the grain and given consumers some much needed reassurance and certainty.

“Credit interest at 3% guaranteed for two years with instant access is an attractive deal in a depressed savings market where you currently have to lock your cash away for a minimum of five years just to earn a best buy 2.05% rate.”

He added that official current account switching numbers have remained “sluggish” as consumers often don’t know whether it’s worth moving banks if rates are going to be cut within a short while of them moving. “This two year guarantee could be enough to sway a good number of those currently sitting on the fence,” he said.

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