Tesco Bank becomes the first UK bank to show foregone interest on customers’ statements
29 July 2015
Tesco Bank has become the first bank in the UK to make clear to customers if they have money in their current account that is not earning credit interest. Going forward, the monthly statements of Tesco Bank current account customers’ will show ‘foregone interest’ – the amount of interest they would have earned if they had transferred their current account balance into an instant access savings account with us.
Foregone interest is the largest source of current account revenue for UK banks. The Competition and Markets Authority (‘CMA’) said that UK banks generated £3.2 billion from interest income made from current accounts2 alone – an average of just under £50 per customer.
While Tesco Bank’s current account customers earn 3% AER on balances of £3,000 or less1, more than 80% of current accounts in the UK do not pay any credit interest3. This allows the banks which provide those accounts to earn a return on money deposited in those accounts, without paying anything back to the customers.
The CMA is currently investigating the UK current account market and will publish their interim report in September.
Benny Higgins, Chief Executive Officer at Tesco Bank, said:
"We constantly ask customers what they want from their bank. One appeal from customers, time and time again, is for greater transparency. Customers know that the lack of transparency enables banks to generate large profits at their expense. In particular, when banks pay little or no interest on their current accounts it enables them to generate billions of pounds for themselves.
"No less than 8 out 10 customers in the UK receive no interest on their current account. Today we become the first bank in the country to respond to what customers are asking for by showing, every month, the interest that customers have foregone. The banking industry as a whole will serve customers better if other banks follow our lead."
For more information and media enquiries please contact:
Tesco Bank press office
+44 (0) 131 274 3630
Notes to Editors:
1. £5 monthly account fee which you don’t pay if you deposit £750 per month. TheTesco Bank Current Account is available to residents of England, Wales and Scotland aged 18 or over. Accounts are subject to status.3% AER/2.96% Gross variable credit interest on balances up to £3000. Interest paid monthly. Annual Equivalent Rate (AER) illustrates what the interest rate would be if paid and compounded each year. Gross is the interest rate paid before tax is deducted.
2. CMA: Personal Current Accounts – Market Study Update – 18/07/2014
3. Tesco Bank Internal Data provided by Argus
Tesco Bank’s goal is to make banking and insurance easier and better value for people who shop at Tesco. We’ve been around since 1997 and today we help more than 5 million customers manage their money every day. Our 4,000 colleagues serve our customers seven days a week from our three main centres in Edinburgh, Glasgow and Newcastle, and we are also available through online and mobile banking 24/7. Tesco Bank participates in the Chartered Banker Professional Standards Board.
Tesco Bank is a trading name of Tesco Personal Finance plc. Registered in Scotland No. SC173199. Registered Office: 2 South Gyle Crescent, Edinburgh, EH12 9FQ