Tesco’s new bank account is set to try to tackle the main high street banks, but the charges applied will cut out some minorities, critics claim.
The current account is made to be able to set up and managed online, but with the added benefit of being able to access it in stores. No doubt Tesco hope that this will encourage more customers to shop at the 300 hundred stores deposits can be made at.
The current account will give a competitive 3% interest rate, and Tesco claim that they are launching the account without the “smoke and mirrors” charges and set up fees that are often tabbed onto current accounts with other banks.
Using the card that comes with the account in stores will rack up loyalty points, combining both the banking and the shopping experience.
However, there is a catch which may cut out a lot of people from accessing it. Unless £750 or over is paid into the account each month, Tesco will charge a £5 fee. This could well exclude the poor or elderly who simply do not get that much paid into their accounts, especially when on a pension, and so will avoid the account and having to pay such a charge.
Neil Duncan Jordan, speaking for the National Pensioners Convention said “this doesn’t sound very pensioner friendly. It will exclude older pensioners on lower incomes – many of whom rely on the basic state pension which doesn’t come close to £750 a month required.”
However, the current account may simply not be targeted at these people. Tesco is losing ground in the market, and shares and sales are falling, so it needs to take some drastic action. By targeting the masses who will get paid that amount on a basic wage, Tesco will generate loyalty in customers who sometimes go elsewhere. Now there is an incentive to shop only at Tesco stores.
The 3% interest rate is sparking a lot of interest as a lot of current accounts offer very low or no interest rates. The chief executive of Tesco defended against this £5 charge, saying that the idea of a free banking account is an “illusion”.
