Earning Avios from the Tesco current account two years on – what has changed?

Love Clubcard, don’t collect Avios?  You should be reading our sister site, Shopper Points (www.shopperpoints.co.uk), which covers the latest Clubcard and Nectar offers without any distracting frequent flyer talk!  Why not check it out now?

Back in June 2014, Tesco Bank launched its current account.  There was a lot of hype about the account at the time but Tesco was, probably correctly, keen to play it down whilst the IT bedded in.

I expected that, after a few months, there would be a major push with a substantial bonus for moving your banking across.  That has not happened.

M&S Bank and First Direct have long standing offers of £100 bonuses for new customers.  It seemed logical to me that Tesco Bank would offer 10,000 Clubcard points (24,000 Avios) at some point.  But, apart from a couple of very tightly targetted trials, nothing has happened.

Is it worth a look regardless though?

Tesco current account

Here is the Tesco Bank website promoting the current account.

The one big change since the launch is that you no longer need to pay in £750 per month in order to get free banking.  The £5 monthly fee for dormant or low value accounts has been removed.

Earning Avios via Clubcard points

You will earn Clubcard points on all of your debit card transactions:

1 point per £4 spent in Tesco (0.4 Avios per £1)

1 point per £8 spent elsewhere (0.2 Avios per £1)

There is ‘small print’ attached to the ‘1 Clubcard point per £8 spent on the debit card’.  All payments to ‘banks and financial institutions’ are exempt.  This means that you cannot pay your mortgage, pay off a credit card bill or pay money into a savings account.  It may work with payments to the Inland Revenue but that is not something that most people can benefit from.

It is also worth noting that debit card spending is rounded down to the nearest multiple of £8.  A £7.99 lunch payment will earn you exactly zero Clubcard points.  This is a major deterrent unless you are using the card for large transactions.

When the Tesco Bank current account launched, these earning rates were seen as poor.  Since then, Tesco has cut the earning rate on its Tesco Clubcard MasterCard to the same level – 1 point per £8 spent.

And a subsidised interest rate

Current account holders receive 3% interest on the first £3,000 in the account.

Whilst there is no sign-up bonus, the 3% interest paid on sums of up to £3,000 is – given current interest rates – an incentive to get an account.  You would receive £90 of interest per year, at least double the rate of the best instant access savings account.

Foreign exchange use of the debit card incurs a 2.75% fee.  This is market level, I admit, but Tesco could have made this free in order to score some marketing points.

Conclusion

The Tesco Bank current account has not got any better since it launched, assuming you would have paid in £750 per month to avoid the fee which has now been scrapped.  However, with interest rates refusing to improve and credit card earning rates dropping down, it looks better by comparison.

It is worth mentioning that Tesco Bank has a good reputation for customer service. You can also pay in cheques and make cash withdrawals at 300 larger Tesco stores across the country.

The lack of a moving bonus remains problematical.  It would be a disaster to open an account only for Tesco Bank to offer 10,000 Clubcard points the following week.  I doubt they would offer both a sign-up bonus and 3% on your first £3,000, however, and in the long run the ‘3% on £3,000’ – which has been in place since the account launched two years ago – would be more valuable unless interest rates elsewhere improve.

If you make a lot of payments with a debit card then the Tesco Bank current account may be worth a look.  For me, the only debit card bills I pay are financial and those would not earn me Clubcard points anyway.  If you don’t like or can’t get credit cards then the debit card gives you an Avios earning rate which is now nearer to matching Visa or MasterCard credit card.

Love Clubcard, don’t collect Avios?  You should be reading our sister site, Shopper Points (www.shopperpoints.co.uk), which covers the latest Clubcard and Nectar offers without any distracting frequent flyer talk!  Why not check it out now?

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Comments

  1. Looks like I have been offered 5000 points in 2014 with no switch and £100 with a switch in April 2015 (ending June 2015). Nothing offered for nearly a year (I probably should have done one of those!). Only ever offered to me and not my wife.

    No sure with the Clubcard changes (and Tesco generally looking to save money and selling off various international parts, and none core businesses) whether these sort of offers will be more or less likely in the future.

    • Gavin says:

      Less likely according to someone I spoke to last week at Tesco pet insurance. Possibly same policy affects the other financial services

  2. Raman says:

    The small print explains why I wasn’t getting Avios for depositing money into another bank account using the debit card. Ah well was worth a try 😉
    Thanks Rob

  3. Virgin just emailed with their Tesco club card offer – 15% bonus if you convert from 1st May to 10th June – it’s on the Tesco website – nothing showing for BAEC or Avios as yet.

  4. Tilly71 says:

    You also get 1000 bonus vurgin miles if you opt into auto convert, do it with this month’s clubcard vouchers due soon, collect the bonus of 15% on top and then turn off auto convert.

Trackbacks

  1. cheap sofas london

    The Tesco current account – generally underwhelming