The Tesco current account is launched – and is underwhelming

This article is mainly for the benefit of our 2,400 email subscribers.  Readers of the site will know that the ins and outs of the account were discussed heavily in the Comments section of the ‘what will it offer?’ post yesterday.

Here is the Tesco website promoting the new current account.

All of the rumoured features I listed yesterday were confirmed.

This is what we know:

The account will be free if you pay in £750 per month ….

…. and will cost £5 per month if you don’t.

You will earn 3% interest on balances up to £3,000 and nothing above that

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

1 point per £4 spent in Tesco

1 point per £8 spent elsewhere

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 MIGHT 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.

There is no sign-up bonus.  This puts the account at an immediate disadvantage to the Marks & Spencer account which currently offers £100.  The M&S account does not pay any credit interest – but the sign-up bonus is also tax free.  The maximum amount of interest you can earn on the Tesco account is £90 per year (3% on £3000) and that will be taxed.

I would strongly expect a sign-up bonus to appear in the medium term.  If you switch now in order to earn a few points from the debit card, you are risking missing out on 5,000 – 10,000 points as a sign-up deal later.

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.

All in all, I don’t see anything here to convince me to switch – unless it turns out that Inland Revenue payments do count for earning Clubcard points via the debit card.

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