Tesco Bank has 'paused' charging its credit card customers a 3.99% fee if they spend via a Curve debit card and has promised to refund those who've already been charged, following a customer outcry.

At the start of June, Tesco Bank changed the rules around what it considers to be a 'cash' transaction and so charges a fee for, and now includes loading money onto a prepaid card as a chargeable transaction.

But angry customers argued that the Curve debit card, which is managed through an app and lets you connect existing credit and debit cards to it to help with budgeting, is not a prepaid card and so should not be subject to the 3.99% fee.

Tesco Bank has now agreed to 'pause' charging the 3.99% fee, and agreed to refund any customers who have already paid it, while it reconsiders its rules.

See our MSE Curve card claims to be 'the only card you need to carry' News story for more information on how the card works.

'Tesco charged me £200 in fees'

According to Curve it currently has 5,000 customers who have connected a Tesco Bank credit card. Some have been in touch with MSE to complain about the changes:

David emailed: "Essentially Tesco has applied cash advance fees to ALL payments going via Curve.

"Personally Tesco have charged me almost £200 in fees which I am naturally objecting to and have complained about. I will escalate as required. It seems to be foolish beyond belief. I have a physical Mastercard issued debit card which Tesco is seeking to unilaterally reclassify."

Tim emailed: "The new T&Cs refer to virtual or prepaid cards of which Curve is neither as far as I am aware as it is a very physical Mastercard debit card."

And Will emailed: "In the time between 1st June and the first time I became aware (when a cash fee dropped on my account) I had already accrued £60 worth of fees."

What should I do if I've been charged for Curve card spending?

Tesco Bank has confirmed if you have been charged for spending on your credit card via a Curve card any charges will be automatically refunded on to your credit card balance.

A spokesperson said: "We recognise that the application of a fee when a Tesco Bank credit card is used to fund Curve accounts has created some confusion for customers.

"We apologise to customers for this confusion. As a result, we have chosen to pause the charging of this fee in relation to Curve customers while we review this matter. Any customer who has been charged to date will be refunded, and should we make any future changes we will let our customers know."

What does Tesco Bank now consider to be cash transaction?

Tesco now counts the following transactions as cash payments, and charges a 3.99% cash advance fee for them:

  • Wire transfers
  • International transfers
  • Repaying borrowing (including loans and mortgages)
  • Buying non-sterling currency from anywhere except Tesco
  • Payments to prepaid or virtual cards
  • Investments (including share trading and spread betting)

A Tesco Bank spokesperson told MSE that changes to rules around cash transactions will not change the way that its customers' spending behaviour is reported to credit reference agencies.