A '0% interest on purchases' offer from Tesco Bank in the run-up to Christmas has left many of its credit card customers "furious" after they were asked to pay unexpected interest charges.
Tesco Bank wrote to credit card-holders in October, telling them: "You can now get 0% interest on Tesco purchases until your March 2017 statement".
The letter added: "This applies to your Tesco credit card spend in Tesco stores and at Tesco.com between 1 November and 31 December 2016. Remember you don't have to do anything to activate this offer as it is already available on your account."
As a result, some Tesco Bank credit card customers paid off their full balance minus the cost of items they'd bought at Tesco. However, when their next statement came through, they found they'd been charged interest on the transactions they HADN'T made at Tesco – even though they thought they had paid these off.
Tesco Bank says it's charging customers who haven't paid off their card in full interest on the "average daily balance" of their account in line with its terms and conditions – and this means that card-holders are charged interest on purchases not made at Tesco, even though they've paid that amount off.
For example, if you spent £1,000 on a credit card over the promotion period - £300 at Tesco and £700 elsewhere - then you might have paid the £700 off and expect to pay no interest as the £300 was at 0%. But because you hadn't cleared the entire balance, Tesco Bank would charge you interest on the entire amount minus what was spent at Tesco - ie, £700.
Tesco Bank insists its marketing "accurately described" the 0% offer. But some customers who have complained say they've been able to get the interest charges waived. Here's a full rundown of what happened and what to do if you're affected – for more interest-free spending options, see our Best 0% Credit Cards guide.
'I feel very misled'
Insurance broker Julie Hunt is one of a number of Tesco Bank credit card-holders to contact MoneySavingExpert.com to complain.
She says: "In October, I received a most welcome letter advising that any purchases made at Tesco in November and December will be on 0% interest until my March 2017 statement. I planned my Christmas shopping around that, purchasing lots from Tesco to take advantage.
"When I checked my statement, despite paying the amount off for the standard purchases detailed on the statement, interest has been charged. I am furious."
David Douglas is another who says he's been caught out: "When I downloaded my credit card statement, interest of £28 was charged – even though all I had unpaid was the item [bought at Tesco]... As an accountant by profession, I am pretty financially savvy on these matters, and I feel very misled by the way Tesco advertised this offer."

Why are customers being charged interest?
While many card-holders feel they're being charged unexpected interest, unfortunately Tesco Bank does seem technically within its rights according to its credit card terms and conditions.
The pre-Christmas offer meant that any item purchased at Tesco or Tesco Direct would be free of interest until March. As a result, many card-holders who would ordinarily clear their full balance chose not to pay off the items bought at Tesco to take advantage of the 0% interest deal.
However, what caught them unawares is that Tesco Bank's terms and conditions state that if customers don't clear their balance in full, they still get charged interest "on the average daily balance until full payment is made" – NOT on the amount left to pay off.
It's complicated, so to clear it up here's a quick summary of how different customers were supposed to benefit from the 0% deal – and how they've actually been affected.
- If you always pay your balance IN FULL... The offer won't have made any difference. You won't normally be charged any interest and that won't have changed with the offer.
- If you don't always pay your balance in full... Then you might have been able to benefit from this offer. The 0% offer would have meant that instead of being charged interest on your full balance, for November and December you would have been charged interest on the full balance MINUS any transactions at Tesco. Essentially you'll have paid a bit less interest than you would usually.
- If you normally pay your balance in full but only paid off non-Tesco transactions this time... These are the customers caught out. Some who normally pay off their balance in full deliberately only paid off non-Tesco transactions. While you won't be charged interest on the Tesco items, you will have to pay interest on your non-Tesco spends – even though you've already paid this amount off.
Can I get the interest charges refunded?
While Tesco Bank's insisting it's done nothing wrong, and it seems to be within its rights to charge the interest it has, some customers who have phoned it to challenge the charges have found it's offered to reimburse them, provided they now pay their balance off in full.
Michael Kirkwood is one who complained. He says: "After a couple of minutes of telling me that I hadn't kept to the terms and me saying that if that was the case then their flyer was highly misleading and I would be putting in a complaint, customer services suddenly changed tack.
"They offered to refund the interest if I paid the balance by the end of this week. They said they'd had a lot of customers calling them with the same query."
Another reader, who is a Tesco employee and asked not to be named, says: "I was horrified to receive my statement in January showing a charge for interest.
"On phoning Tesco Bank, I was told the original letter had been badly worded and didn't apply to people like me who pay off their balance in full every month. They have waived the interest charge, but told me that if I did not pay my balance in full on this statement then I would again incur interest."
Helen Saxon, MoneySavingExpert.com's chief product analyst, says: "Tesco Bank hasn't broken any terms and conditions here, but the fact remains that a lot of people have been caught out by its 0% offer.
"We've heard it's refunding people who call to complain about being charged interest when they've paid off all their non-0% purchases, which does suggest an acknowledgement from Tesco Bank that this offer could have been better explained. If you've been tripped up by this, it's worth a call to Tesco Bank to ask for your interest back."
What does Tesco Bank say?
A spokesperson for Tesco Bank denies that the offer has misled customers and says: "We aim to make all communications with customers as clear as possible and are confident we have accurately described this credit card offer which was for purchases made at Tesco.
"A small number of customers have queried the interest on purchases made outside of Tesco during the period of the offer. We have explained the interest has been correctly calculated as per the standard terms and conditions. All customers will continue to benefit from 0% interest on purchases made at Tesco until March."