Tesco's assault on savings market steps up a gear
Tesco Bank has launched a fixed-rate savings account with an interest rate of up to 3.5%, creating a stir among the traditional high-street banks.
The Fixed Rate Saver Account is the first product to be offered by the supermarket as a standalone bank, following the Tesco buyout of the RBS share of the business in 2008.
Paying 2.95% for customers who deposit their savings for a year and 3.5% on savings tied up for two years, the account has a minimum deposit of £2,000.
Customers can opt to have interest paid monthly, annually or on maturity to a separate account. Accounts can only be opened by telephone (0845 678 5678).
Benny Higgins, chief executive of Tesco Bank, says: "The account offers a great rate of interest for customers and is simple to open as it can be set up immediately by debit card.
"We look forward to offering customers even more choice as our business develops."
Tesco announced that subject to regulatory approval, it will be launching mortgages in the first half of next year, with current accounts to follow in the second half of 2011.
John Ennis, banking director at Wincor Nixdorf, a technology provider to Metro Bank and Barclays, says the introduction of new banks on the high street will be positive because "increased competition means more creativity and innovation to gain a competitive edge and that, in turn, means a better overall service for the customer".
He adds: "There is no doubt that the retail banking sector is more competitive than ever before and traditional banks will need to adapt and update their existing propositions to maintain leadership and compete in today’s market."
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.