Recently Tesco revealed their intention to offer generous interest rate guarantees for their current account holders. Just weeks later, they’ve had to ‘pause’ any further applications.
You may not have heard of the retail giant’s ingenious idea to add a guarantee to their current account which ensured a 3% interest for customers, while also offering one Clubcard point for every £1 spent in-store. Earlier this month, and to much fanfare, Tesco unveiled an account featuring a guaranteed annual payout of £90 if the balance remained at the £3,000 maximum.
According to Tesco:
The Tesco Bank Current Account Guarantee was launched to give our existing current account customers certainty on the level of interest their accounts will earn, as well as even more Clubcard points when they shop at Tesco.
Unsurprisingly, given the generous nature of the current account – which also guaranteed interest rates until April 2019 – customer registrations sky-rocketed. What is surprising is that this apparently unprecedented consumer demand caught Tesco off-guard, consider they’ve been in the banking sector for years, and should also instinctively understand a shopper’s love of a good bargain. As a result of the rise in applicants, Tesco decided the only option available to maintain the service as it stands was to shut the doors on newcomers.
In a statement quietly pushed out on their website, Tesco explained:
In order to best serve our existing customers, we have decided to pause accepting new applications for the time being. In the coming weeks, we will let customers know when they can apply again for the Tesco Bank Current Account.
The ‘pause’ comes despite the fact that the current account was well-rated, with Tesco saying customer feedback had been ‘brilliant’, and they were ‘delighted’ to welcome new customers. Quite when they’ll be welcoming new account holders again is unclear, although Tesco imply the move is temporary. Pausing the current account also highlights a wider, growing problem for everyday bankers: The closure, temporary or otherwise, means savers seeking competitive accounts are discovering their options – and perks – are shrivelling up.
Already we’ve seen TSB trim their Classic Plus interest rates from 5% to 3% on £1,500. Meanwhile, Lloyds halved interest earned on £5,000 down to 2% for their Club Lloyds Account, and last year, Santander halved interest rates to 1.5% for their 123 account. For regular savers, then, the Tesco Current Account would appear very attractive compared to the ever-shrinking rates offered by rival banks.
The bad news didn’t go unnoticed by comparison website uSwitch, with spokesperson Tashema Jackson explaining that savers were ‘once again left with slim pickings when it comes to finding a good deal for their savings’.
According to Jackson, as it stands, savers should look into Nationwide’s FlexDirect account, with its 5% interest rate on balances of up to £2,500. However, this rate is only available for a saver’s first year, so it’s best to research precisely what your financial options are.
With Tesco shutting for the foreseeable future, and other banks slashing rates, wherever savers look, they’ll see their choices becoming severely limited.