Supermarket giant Tesco has added some competition to the current account market by launching its own service, which attempts to attract customers with high interest rate and Clubcard rewards.
Tesco’s account offers a 3% (AER) interest rate on credit balances up to £3,000 and an overdraft rate of 18.9% (EAR). Customers will be charged a monthly fee of £5 for the account, but this is waved for those depositing over £750 per month, and spenders are offered Clubcard points for each purchase.
By imposing a monthly fee on lower incomes, Tesco Bank is attempting to attract a wealthier clientèle than the basic accounts offered by the likes of Barclays, HSBC, and RBS, and the Clubcard points are intended to keep shoppers loyal to the supermarket.
The recent increased competition in the current account market is partly due to the implementation of the Current Account Switch Guarantee, which makes it easier for consumer to switch between banks, with the whole process completed in less than seven days. This scheme means that it is more important than ever for banks to offer services that attract and maintain customers, and has seen the introduction of a variety of new offerings from TSB, M&S, and others in recent weeks.
