Savers have been so desperate to find a decent return on their nest egg that many have, in recent years, made use of generous ‘in credit’ rates available on bank current accounts.
When Tesco Bank announced in February this year that it was guaranteeing the 3% interest rate on the first £3,000 on its bank account for at least two years, it created a problem it hadn’t reckoned on.
Experts were encouraging their readers to exploit this ‘savings loophole’ – particularly as many rivals including Santander, Lloyds, Halifax and TSB had already slashed credit interest deals and rewards offers in the months leading up to this move.
Unfortunately demand was so great that Tesco Bank had to put a freeze on accepting new applications for it’s current account due to the influx of savers looking for a market leading deal – after all 3% and instant access is an amazing deal in today’s depressed savings market.
So today Tesco Bank has announced that anybody wishing to take advantage of the 3% interest rate will need to use the account for what it was intended – i.e. a bank account rather than simply a bolt hole for £3,000 worth of savings.
Customers will now have to deposit a minimum of £750 per month and have three direct debits set up on the account (excluding payments to Tesco Savings) if they wish to enjoy the 3% in credit interest rate.
I’m in agreement with what Tesco Bank has done to close this ‘loophole’ as current accounts are designed to help us manage our day to day finances and not act as a handy savings account for those who find themselves poorly served by the wider savings market.
I can hear the cries of despair from the loophole exploiters from here, but after all is said and done it’s a common sense move from Tesco Bank.
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