The interest rate you get on your Tesco Bank current account is dropping from 3% to 1% on the 14th June.
Tesco Bank hit the headline’s last week as it revealed it was trying to offload its mortgage account to another lender. But I’m talking about another change which will affect anyone with a Tesco current account.
I’ve had a Tesco current account for a good few years now – one of the many in my wallet. The benefit was the 3% interest offered on balances up to £3,000. If you had the full amount saved that was worth £90 a year. Only Nationwide could beat this – and only for the first year.
But a few months back Tesco announced this is changing, with the rate dropping instantly to 1% for new customers, and from the 14th June for existing customers. Well, that date is nearly with us, so if you have a Tesco current account, it’s time to switch. Here are the best options right now.
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Switch for a cash bonus
You can earn some (reasonably) quick cash by opting for a switching bonus. If you do this you will need to completely close your Tesco account as part of the switch. That’s no bad thing, but worth bearing in mind.
Deals can change regularly, and I update my huge list of bank switching options regularly, but here’s my pick:
Natwest or RBS Reward
Natwest and RBS are currently offering £125 to switch now, and another £50 if you stay for 12 months. So a total of £175. What makes this worth even more is that both have a “reward” account where you can earn 2% cashback on many of your household bills.
Though both accounts come with a £2 fee, you’ll earn this back and make more as long as you have your direct debits coming out of this account. I’ve written more about the Natwest Reward account here, and the RBS version is essentially a carbon copy.
The Natwest offer ends on the 7th June – so you don’t have much time in place to open the account and start the switch. But the RBS offer runs until later in the month.
Switch for high interest
Decent interest rates on current accounts have been falling for the last few years, and in July TSB’s 5% will also drop to 3% on balances of up to £1,500. That’s still better than most, but my pick, at least in the short time is…
For the first year with this account you can earn 5% on the first £2,500. That’s worth £125. After year one it does drop down to 1%, but you can always switch again in 12 months.
In fact you don’t need to switch to get this offer – you can just open up a new account. But if you have a friend already with the bank and they refer you, you’ll both get a £100 bonus if you do switch, meaning you’re looking at a potential £225 extra in the first year.
Switch for something different
If you don’t have much money in your savings, or perhaps you’ve already used up all the different switching bonuses as a serial switcher (just like me!), then I still think it’s worth moving away from Tesco, perhaps to one of these:
Monzo or Starling
you could look at opening an account from the likes of Monzo or Starling. Both are pioneering new ways we bank via their apps. In fact, you can only use them using the app. There are no branches or phone lines to help.
I’ve had both for a few years and though I don’t use them day in day out I do really like many of the features. I wrote a review of Monzo recently which gives you a decent idea of how it works – and how you can nab a free fiver for signing up.
Read more on bank switching: