High-interest Tesco account open for new applicants

TESCO Bank has reopened applications for an account paying 3% interest after it experienced “unprecedented demand” for the deal earlier this year.

On February 2, the bank, whose current account pays 3% on balances up to £3,000, announced a guarantee would be placed on its rate from April 1, 2017 to April 1, 2019.

The bank paused applications just over a week later on February 10, saying it had “experienced an unprecedented level of demand from new customers following the launch of this offer”.

On Tuesday, Tesco said new customers can now apply for the deal – with some conditions that do not apply to existing customers.

The new conditions mean that to receive the guaranteed interest each month until 2019, new applicants are required to put £750 into their account per statement month.

They must also have at least three direct debits paid out of the account per statement month, excluding direct debits to a Tesco Bank savings account.

As well as the 3% interest rate, customers can also build up clubcard points when using their debit card.

Tesco Bank managing director David McCreadie said: “Given the unprecedented response to the initial offer we made in February, there are a number of conditions new customers must meet to qualify for the credit interest benefit of this current account offer.”

Tesco’s move bucks a trend of current account providers slashing interest rates or trimming back rewards in the low-rate environment after the Bank of England base rate fell to 0.25% in 2016.

Halifax has previously cut the £5 paid per month to its Reward current account customers who fulfil certain criteria to £3.

Santander has halved the 3% rate on its flagship 123 current account to 1.5%.

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.

When it first launched its current account in 2014, Tesco Bank chief executive Benny Higgins said it would bring a “fiercely competitive” customer focus from the retail sector which did not exist in banking.