Tesco Bank will tell you how much interest you could have earned by shifting excess current account funds into its savings account.
Tesco Bank is the first bank to show current account holders how much they’ve lost in what's termed ‘foregone interest’ by not putting spare money into a savings account.
From here on in, bank statements will highlight the amount of interest customers could have earned if they transferred any current account balance over £3,000 into Tesco's Instant Access Savings Account.
Why £3,000? Because Tesco current account holders earn 3% AER on balances of £3,000 or less. The instant-access savings account pays 0.6% interest.
Earn up to 5% interest from a current account: compare them now
Demand for greater transparency
This move by Tesco Bank follows customer demand for greater transparency.
[SPOTLIGHT]The Competition and Markets Authority (CMA) reports that UK banks generate £3.2 billion from foregone interest in current accounts alone every year, an average of just under £50 per customer. A staggering 80% of current accounts don’t offer interest at all, which goes some way to explaining these high levels of income from foregone interest.
An investigation into the UK current accounts market is currently being carried out by the CMA, publishing its interim results this September. This move from Tesco may well have pre-empted one of the conclusions of that investigation.
The best instant-access savings accounts
You could actually earn more interest by putting your remaining funds in a savings account with a different provider.
The good news is that there are savings accounts which have interest rates way above 0.6%.
Here are the best ones on the market right now. The first lot have a bonus for the first 12 months. Be warned though, you’ll be dropped on to a much less attractive rate after this period is up.
|
Account |
Interest rate (gross AER) |
Minimum deposit |
Withdrawal limits |
Bonus |
|
BM Online Extra |
1.60% |
£1,000 |
None |
Rate includes 1.10% bonus fixed for first 12 months. |
|
Post Office Online Saver |
1.40% |
£1 |
None |
Rate includes 0.75% bonus for first 12 months. |
|
Tesco Bank Internet Saver |
1.35% |
£1 |
None |
Rate includes 0.60% bonus fixed for first 12 months. |
|
Saga Telephone Saver* |
1.35% |
£1,000 |
None |
Rate includes a 0.85% bonus fixed for 12 months. |
|
AA Internet Extra |
1.25% |
£1,000 |
None |
Rate includes 0.75% bonus for the first 12 months. |
*Available to savers aged 50 or over.
These bonus-free savings accounts don’t drop their rate after a certain period of time.
|
Account |
Interest rate (gross AER) |
Minimum deposit |
Notes |
|
1.65% |
£100 |
Online |
|
|
Virgin Money Defined Access E-Saver |
1.51% |
£1 |
Online |
|
Paragon Bank Limited Edition Easy Access |
1.46% |
£1 |
Online |
|
Kent Reliance Online Easy Access Account |
1.45% |
£1,000 |
Online |
|
ICICI Bank HiSAVE SuperSaver Savings Account |
1.40% |
£1 |
Operated online and over the phone |
|
GE Capital Saver |
1.30% |
£500 |
Opened and operated online. Maximum investment of £250,000. |
So while this is a welcome initiative from Tesco, to really make your money work harder you need to look beyond its savings account.
Compare savings accounts with loveMONEY
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