Tesco Bank offers two-year guarantee on interest rate for current account
Tesco Bank will guarantee its current account customers a 3% interest rate for the next two years, bucking a recent trend of perks being slashed.
The bank, which pays 3% on balances up to £3,000, has announced a guarantee will be placed on its rate from April 1 2017 to April 1 2019.
Current account customers will also receive more Clubcard points for their spending in Tesco when the guarantee period starts on April 1.
They will get one Clubcard point per £1 spent in Tesco during the guarantee period, increasing from the current one point for every £4 spent, on top of the normal Clubcard points collected.
The move comes as a wave of banks have cut their interest rates on current accounts or reduced their perks, following the cut in the Bank of England base rate cut to 0.25% last year.
Earlier this week, Halifax said it will chop the bonus it offers customers to switch from March 1, from £100 to £75.
Halifax had previously announced the £5 per month it paid to its Reward current account customers who fulfil certain criteria would fall to £3 from February.
Santander has halved the 3% rate on its flagship 123 current account, to 1.5%. And Lloyds Bank has cut its Club Lloyds credit interest rate from 4% to 2%, while TSB reduced a 5% rate on its Classic Plus account to 3% .
Nationwide Building Society continues to offer customers 5% on balances up to £2,500 for the first 12 months.
The most recent from the seven-day current account switching service showed between April 1 and June 30 2016, Santander, Nationwide Building Society and Halifax continued to make particularly strong customer gains, while challengers Tesco Bank and TSB also made net increases.
When it first launched its current account in 2014, Tesco Bank's chief executive Benny Higgins said it would bring a "fiercely competitive" customer focus from the retail sector which did not exist in banking.
He said on Thursday: "We recognise that we live in a time of uncertainty, where our customers are working hard to get as much value as possible from their money, and so we are taking a step that demonstrates we put our customers first."
Rachel Springall, a finance expert at website Moneyfacts, said: " It's positive to see a promise to retain a competitive rate of interest for the next few years at a time when many other current accounts have suffered interest rate cuts, including Santander and Lloyds Bank.
"Savers will need to remember that if they have a significant amount of cash over £3,000 to invest then they will need to look at alternative accounts to make their money go a bit further.
"If they have a short-term savings goal they can earn up to 5% on regular savers with HSBC, first direct and M&S Bank if they switch their current account to them, so it's worth keeping in mind that customers need to assess the overall package of a current account and other benefits that that come with it before they switch."
Andrew Hagger, a personal finance expert at MoneyComms, said: "Official current account switching numbers have remained sluggish as consumers often don't know whether it's worth moving banks if rates are going to be cut within a short while of them moving - so this two-year guarantee could be enough to sway a good number of those currently sitting on the fence."