Tesco Bank to reveal lost interest to account holders

Current account banking is undergoing slow but significant change
Current account banking is undergoing slow but significant change

A bank has pledged to make it clear to customers if they have money sitting in their current account that is not earning credit interest.

Tesco Bank said that the monthly statements of its current account customers will show “foregone interest” - the amount of interest that they could have earned if they had transferred their current account balance in to an instant access savings account with the bank.

Tesco is a relatively new player in the current accounts market, having launched its first current account in June 2014 with a promise to shake up the sector.

Its current account pays three per cent on balances up to £3,000, and charges a £5 fee unless holders pay in £750 a month.

The move will mean that people with more than £3,000 sitting in their account will be able to see how much cash they could have earned by moving their remaining money into an instant access savings account with Tesco, which currently pays 0.6 per cent interest.

The comparison will not look at what customers could receive if they moved to another bank, although it may encourage more people to think about where they are holding their money.

Many current accounts pay no interest at all in the low interest rate environment, and while they may appear to be “free”, people pay in other ways, for example through overdraft fees or foregoing interest which they could have received from an account elsewhere.

A new seven-day current account switching service was set up across the industry in 2013, aiming to make the process of ditching your old bank and moving to a new one easier.