Tesco Bank account closures: customers trapped in bank accounts after switching failure

Tesco Bank customers trying to switch current accounts have been trapped in limbo for a week.

Thousands of Tesco Bank current account holders are unable to move their money to a new bank, even though Tesco has announced that it is closing its bank account service in just a couple of months.

In a completely farcical situation, the bank has had to ask its customers to stop asking to switch their accounts elsewhere, just weeks after telling them it was stepping away from offering such accounts.

What on earth is going on?

Shutting up shop

Last month, Tesco Bank announced that it would be closing its current accounts entirely. The supermarket bank had around 200,000 customers but had already stopped taking on new customers back in December 2019.

Account holders can continue building up Clubcard points on their banking until the end of November, at which point the accounts will close.

Importantly, however, they won’t be able to deposit or withdraw cash from Tesco’s customer service stores from 15th October.

We want you to leave, just not yet

Now obviously, if you’re one of the existing Tesco Bank account holders you may understandably have wanted to move swiftly, shifting your money over to a new account.

After all, why hang about with your money in an account that will soon cease to be, when you can instead move to a new account offering different rewards?

There’s no shortage of attractive accounts at the moment, with Nationwide the latest to introduce a cash bonus for new customers opening an account.

Yet it seems that Tesco wasn’t quite prepared for how its customers would react.

Evidently, it was shocked by how many customers didn’t want to hang about, and were instead looking to switch, to the point that it was overwhelmed with requests for accounts to be switched and closed.

It’s meant that Tesco has started declining requests to leave the bank, leaving account holders trapped on an account they don’t want, and which the bank doesn’t want to offer either.

It's now been a week since the switching freeze was put in place and still there's no official word on when it might be lifted, leaving customers in limbo.

Below is the message currently greeting account holders on Tesco's current account page:

Switching made easy

It seemingly all comes down to the Current Account Switching Service (CASS).

The CASS was a brilliant innovation when it was introduced, as it makes moving between bank accounts much easier.

Essentially, it cuts out all of the stress ‒ the banks themselves have to handle closing your old account and transferring your direct debits, and all within a seven day period.

And it’s that time deadline that has caused the issues with Tesco. Effectively, so many people are trying to close their Tesco account that the bank is unable to guarantee it can handle the switch within seven days.

As a result, it’s been declining requested switches from customers, so that it can work through the existing backlog before handling those switches later on.

Customers have been sent text messages to let them know that their proposed switch has been declined, with the promise of a second text message later on once they can restart the switch process.

Where is the surprise?

It’s an extraordinary situation, where Tesco Bank current accounts have become akin to the Hotel California ‒ you can check out, but you can’t actually leave.

But what’s so incredible really is that Tesco was apparently surprised by the demand from existing customers to move to a new bank.

How on earth can it have expected anything else?

To now leave these customers in limbo, and potentially missing out on those welcome bonuses should they be pulled before the delayed switches go through, is absolutely farcical.

It’s a situation the regulators will likely be watching closely.

Letting customers down

The failings at Tesco Bank go beyond its ability to handle an account switch though.

This week the Competition and Markets Authority published the results of its latest biannual poll, in which banking customers are asked about their experiences with their banks.

And it’s fair to say that Tesco Bank stood out among the competition as having delivered a particularly poor service to its customers.

In the overall quality of service category, it came bottom with a score of just 48%, level with Royal Bank of Scotland but a country mile behind the likes of Monzo, Starling Bank and First Direct, all of whom scored above 80%. 

In fact, the only category in which Tesco didn’t come bottom was branch services, and that’s only because Tesco Bank doesn’t actually have any branches.

Perhaps it’s best for everyone that the bank moves out of the current account space and leaves it to banks better placed to treat customers well.