‘This is what you could have earned’: Tesco highlights missed interest potential
From today, the monthly statements of Tesco Bank current account customers will show ‘foregone interest’ – the amount of interest they would have earned if they had transferred their current account balance into an instant access savings account.
Foregone interest is the largest source of current account revenue for UK banks. The Competition and Markets Authority (CMA) said that UK banks generated £3.2bn from foregone interest in current accounts alone – an average of just under £50 per customer.
More than 80 per cent of current accounts in the UK do not pay any credit interest. This allows the banks which provide those accounts to earn a return on money deposited in those accounts, without paying anything back to the customers.
The CMA is currently investigating the UK current account market and will publish their interim report in September.
Benny Higgins, chief executive officer at Tesco Bank, said: “One appeal from customers, time and time again, is for greater transparency. Customers know that the lack of transparency enables banks to generate large profits at their expense. In particular, when banks pay little or no interest on their current accounts it enables them to generate billions of pounds for themselves. No less than 8 out 10 customers in the UK receive no interest on their current account. Today we become the first bank in the country to respond to what customers are asking for by showing, every month, the interest that customers have foregone. The banking industry as a whole will serve customers better if other banks follow our lead.”