Tesco Bank is guaranteeing its current account holders a 3% rate of interest until April 2019.
Following the lowering of the Bank of England’s base rate to 0.25% last year, many major banks including Santander, Lloyds Bank and TSB cut the interest rates paid on their flagship current accounts.
However, Tesco has bucked this trend by guaranteeing customers who hold its current account 3% interest between 1 April 2017 and 1 April 2019.
This rate will be paid on all balances up to £3,000. This means someone who holds £3,000 or more in their account will be capped at earning £90 interest each year.
From 1 April 2017 customers will also receive one Clubcard point per £1 spent at Tesco on their debit card, up from the current level of one point per £4. Holders will continue to earn one point for every £8 spent elsewhere.
The guarantee will apply to new and existing account holders. The account continues to be fee-free.
Benny Higgins, Tesco Bank chief executive officer, says: “Too often banks focus on new deals for new customers, with little consideration for rewarding existing customers.
“With our unique guarantee, we are offering Tesco customers peace of mind that they will make a return on their hard earned money, as well as rewarding them for their loyalty by giving them a bigger thank you when shopping in Tesco.”
At a time when many banks have cut interest rates and rewards it’s great that Tesco Bank has guaranteed this rate until April 2019. This seals its place as one of the most competitive accounts on the market.
By comparison, the top two-year savings bond from Atom Bank returns just 1.65%, so this 3% deal will give a much better return on your cash.
In the current account market, the Royal Bank of Scotland’s Vantage account offers 3% interest on balances between £3,000 and £5,000, but holders must pay in £1,000 per month and set up two direct debits. Tesco’s deal has no such limits, meaning it can effectively be used as a savings account.
If you’ve got much larger balances, the Santander 123 Current Account offers 1.5% interest on balances up to £20,000 and cashback on household spending, albeit with a £5 a month fee.
With the Tesco account the Clubcard points are an added incentive. Spending £1,000 per month, including £250 a month in Tesco, will earn £70 in Clubcard vouchers over the course of the year. Ideal if you’re a Tesco shopper.
However, it’s worth noting the bank was hit by a cyber attack in November 2016 which saw fraudulent transactions made from the accounts of 9,000 current account customers.