Tesco Bank adds more customers to trial of new debit card that gives you extra Clubcard points - and budgeting help

The banking arm of the supermarket giant launched the card on 18 March but it's currently in a trial phase set to last until the autumn. A full launch is expected later this year. It's currently open to Tesco Clubcard members who are UK residents and aged 18 or over – although Tesco told us it'll only accept up to around 20,000 applications until September.

You can apply online via Tesco's website. There will be a soft credit file search when you apply but this won't affect your creditworthiness, even if you're rejected.

As part of the launch, Tesco will give you an extra Clubcard point for every £1 spent in-store or online at Tesco during the first 100 days using your Clubcard Pay card (followed by one point per £1 - the same as using a regular Tesco Clubcard). For more Clubcard tips and tricks, see our Loyalty Points Boosting guide.

You can top up the prepaid card via any UK bank account, plus it rounds up spending and puts it into savings

Clubcard Pay is not the same product as Tesco Bank's current account, which is no longer available to new customers. Instead, the new debit card is primarily aimed at helping customers to budget – and its features are restricted accordingly. Here's how it works:

• You can top up using any UK bank account and then use the card to shop in-store and online. Clubcard Pay comes with a contactless Visa debit card. You can add money to it from your existing bank account using Tesco Bank's mobile banking app and can then use it like any other card to pay in-store and online.

• You can collect Clubcard points on your spending. The Clubcard Pay debit card acts as your Clubcard when used in Tesco – meaning you don't need to swipe both. You'll collect two points for every £1 spent in Tesco in the first 100 days after opening your account and then one point per £1 after, which is the same as with a regular Clubcard (normal exclusions apply, so you won't get the points on items such as tobacco, lottery tickets, prescription medicines, infant formula milk). You'll also collect one Clubcard point for every £8 you spend elsewhere – the same as with a Tesco Bank credit card (see below for more on how this works).

• It comes with a 'round ups' feature and savings account. When you spend on the card, your transaction will be rounded up to the nearest pound, with the difference going into a 'Round Up' savings account (this is opened for you automatically when you sign up to Clubcard Pay). For example, if your basket comes to £14.85, an extra 15p will be taken from your Clubcard Pay card account and put into the Round Up savings account. If you'd prefer, you can opt out of this using the app.

  The Round Up savings account allows unlimited withdrawals without penalty and pays 0.1% AER variable interest – this is easily beaten by the top easy-access accounts though, which currently pay up to 0.5%.

  It's also worth noting that this functionality isn't unique to Clubcard Pay – several high street banks, including Halifax and Lloyds, as well as app-based banks Monzo and Starling, also offer it to their current account customers. See our Digital Banking guide for more info.

• Money held with Clubcard Pay and Round Up is protected. Tesco Bank is fully UK-regulated so you get the usual £85,000 per person savings safety protection on the funds you hold in the Clubcard Pay and Round Up accounts. Note the £85,000 limit is shared across all accounts you hold with Tesco Bank.

But you can't set up direct debits and it doesn't have an overdraft

But before you take out the prepaid card, you also need to watch out for the following: 

• It doesn't have an overdraft. In the event your balance goes below zero (eg, where a retailer accepts the payment without checking if you've enough money in your account), you'll need to top up your account immediately – otherwise you could face your account being suspended or even closed. But you won't be charged any fees in this scenario.

• You can't switch to this account or pay out direct debits from it. Tesco says Clubcard Pay is not designed to be used as your main bank account, so you can't use the Current Account Switching Service and it doesn't support direct debits, so you won't be able to pay household bills from it in this way.

• It's expensive to use abroad. While you'll still earn one Clubcard point per £8 spent abroad, any gain is totally wiped out by the fees. Tesco charges a 2.75% foreign exchange fee on all Clubcard Pay debit card transactions made outside of the UK.

  If you make an ATM cash withdrawal outside the UK in a foreign currency (excluding Euro), you'll need to pay an additional 1% cash withdrawal fee (though there's no withdrawal fee for withdrawing Euros within Europe). For comparison, our current Top Pick Travel Debit Cards don't charge any fees on spending or withdrawals abroad. 

You could earn more cashback with a credit card

While Clubcard Pay could be an easy way to pick up some extra points, in the long term it's possible to earn much more in points or cashback using a rewards credit card, provided you only use this for normal spending and pay it off IN FULL each month. For example:

• The Amex Platinum Cashback Everyday card gives newbies 5% cashback for the first three months (up to a max £100). After that, you get 0.5% back on spending up to £10,000 (up to £5,000 until 4 August), and 1% above that. Though note you need to spend at least £3,000 a year to get ANY cashback.

• The Amex Preferred Rewards Gold card gives newbies an intro bonus worth up to £184 in Nectar points, a £100 M&S/Amazon voucher or 23,000 airline/ hotel points, plus ongoing points on all spending. It's fee-free in the first year but costs £140 a year from year two – so diarise to cancel before then if you want to avoid it.

Tesco Bank also has several credit cards which let you earn Clubcard points, including: 

• The Tesco Bank Purchases credit card. It doesn't have an intro bonus, but it pays an extra Clubcard point for every £4 spent at Tesco (in addition to the usual point per £1). So if, for example, you spent £4 at Tesco you'd get four points via Clubcard Pay (or eight points in the first 100 days) or five points on the Tesco credit card. You also get one point per £8 spent elsewhere. In addition, it offers up to 20 months 0% interest on spending (but don't use this as an excuse to overspend).

See our Credit Card Rewards guide for full details and our top picks, including more non-Amex options.

These features could change in future

As Clubcard Pay is currently being trialled, its features could still change before the full launch expected later this year. Tesco told us the core functionality of being able to pay, save and earn Clubcard points is unlikely to change – but that the reason it has only launched it to a limited number of shoppers is so it can test the offering and gather feedback. So the exact features could be tweaked later on.