Over the last few months there's been a surge of activity in the current account market, and the latest addition has shaken it up once again. Tesco Bank has today launched its first ever current account with a range of benefits to tempt shoppers and banking customers alike, and it's certainly got the industry talking.
Tesco's account boasts 3% credit interest on balances up to £3,000, as well as a competitive overdraft rate of 18.9% AER. It comes with a monthly fee of £5 – which will be waived if £750 is deposited per month – and the addition of Clubcard points on every debit card spend will be a hit for regular shoppers.
Sylvia Waycot, editor of Moneyfacts.co.uk, commented on the latest addition to the market:
"The eagerly-awaited launch of the Tesco Bank current account has been designed around fair play. It works equally well when you are in credit by paying interest on your balance or applying low charges should you go overdrawn, which is great news as many of us fall into both categories from time to time, [making it] an excellent all-round account."
It follows hot on the heels of other new accounts to hit the market. TSB caused a stir when it offered an account paying 5% interest on balances up to £2,000, while the likes of M&S, Virgin Money and Post Office have either launched, or are in the process of launching, their own offerings.
Well, the Current Account Switch Guarantee could have a part to play. The service – which makes it easier than ever to switch bank accounts, with the entire process being completed in seven days or less – was implemented last year, and means providers know they need to work harder in order to attract, and keep, their customers.
Since the launch there's been a definite increase in the number of benefit-laden accounts, with great incentives all aimed at getting your business. The likes of cashback, which once tended to be reserved for credit card spending, is becoming a common addition to a lot of accounts, as are reward points in general, while packaged accounts (which can include things like travel insurance, car insurance and even film downloads) are becoming ever-more competitive.
Then there's the fact that people are simply using their debit cards more, and that means they want to make the most of it. Research from M&S Bank – who incidentally launched their first free current account last month – has revealed a clear rise in debit card spending, with 25% of those with a debit card now using it more frequently than they did 12 months ago.
This figure could rise even more if shoppers would get rewarded, as 55% of those surveyed admitted they'd use their debit card more frequently if they knew they'd get rewards or points on their spending – and 27% who don't currently earn rewards would switch their main current account to so do.
All in all, people simply want more from their bank account, and providers seem to be rising to the challenge. These days there's something for everyone whether you're after low overdraft fees, reward points or even a viable home for your savings, and with competition only ever increasing it'll be interesting to see what's out there next.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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