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Tesco Bank cutting current account interest from 3% to 1%

Tesco Bank cutting current account interest from 3% to 1%

Tesco Bank is slashing the interest rate on its popular current account from 3% to 1%.

The change will come into effect on 14 June 2019 for existing customers, who all should have received a letter informing them of the change. The rate was cut to 1% for new customers on Friday 1 March. 

The Tesco Bank current account pays interest on up to £3,000, and after the cut, the max you can earn will drop from £88.80/year to £30/year. 

For the best savings rates, including 1.5% easy access and a Nationwide current account offering 5% interest for a year, see Top Savings.

What the Tesco Bank account offers

The Tesco Bank account, which was one of our top picks for current account savings, will no longer be as competitive when the interest rate drops. Here are its key features:

  • It currently pays existing customers 3% AER variable interest on up to £3,000 per account, but this will drop to 1% on 14 June.

  • To get any interest, you need to pay in £750 and pay out at least three direct debits each statement month. If you have two Tesco Bank current accounts, it's possible to cycle the £750 minimum monthly pay-in between the two.

  • You get an extra Clubcard point per £1 on debit card spending at Tesco, and one point per £8 spent elsewhere. This isn't changing so will still apply after 14 June. 

Consider ditching and switching in June

When Tesco's current account interest rate drops to 1%, it's worth checking whether it's worth switching account, as you'll likely be able to earn more elsewhere. 

Of course, rates could change between now and 14 June, but to give you an idea, you can currently earn 1.5% with the easy-access Marcus account, or up to 5% on £2,500 for a year with a Nationwide current account. 

Remember to check our Top Savings Accounts guide for the top picks nearer the time.

What does Tesco Bank say?

A Tesco Bank spokesperson said: "In April 2017, we made a two-year commitment to guarantee the interest rate customers receive to provide certainty as rates were reducing in the market. As the end of that commitment approaches, we have written to customers informing them their interest rate will change on 14 June."