Tesco Bank has brought back its popular current account with a guaranteed 3% on savings until April 2019. But it's got a couple of new caveats to consider.
Tesco Bank has brought back it's 3% cashback current account after pulling it in February.
The account was taken off the market after only eight days because the bank was overwhelmed by applications from new customers.
However, there are a few caveats which make the rate harder to bag this time round.
David McCreadie, managing director of Tesco Bank, said: "Given the unprecedented response to the initial offer we made in February, there are a number of conditions new customers must meet to qualify for the credit interest benefit of this current account offer.”
Those who applied for the account two months ago are unaffected by the changes.
Is it still worth it?
The Tesco Bank Current Account is a decent option for savers.
The 3% variable interest on balances up to £3,000 will allow you to earn up to £90 a year in a single account or £180 if you open a single and joint account and spread £6,000 between the two.
But to ensure you get the maximum 3% interest rate until April 2019, you'll need to put £750 into your account every statement month. You'll also need to have at least three direct debits going out of your account every month, excluding direct debits to a Tesco Bank savings account.
The good news is that you'll still get Clubcard points on your spending. You’ll get one Clubcard point per £1 spent at Tesco or one Clubcard point for every £8 spent elsewhere.
And unlike other top deals, the account is fee-free.
What's more, the rate is now guaranteed not to fall for two years, which means the account is like a two-year fixed rate bond, but better.
The Tesco Bank Current Account beats the top rate on a two-year fixed-rate bond by a long way (the best rate pays just 1.8% currently) and allows you to have easy access to your cash.
Other banks slashing rates
Promises to keep the 3% rate until April 2019 came about in a time when rivals were slashing their cashback.
The return on the Santander 123 Current Account was halved from 3% to 1.5% in November 2016, while TSB’s Classic Plus went from paying 5% on balances up to £2,000 to 3% on balances up to £1,500 in January.
Lloyds Bank followed suit soon after, ditching the tiered rates of up to 4% on balances between £4,000 and £5,000 on the Club Lloyds account and replacing them with a flat rate of 2% on balances from £1 up to £5,000.
How does Tesco Bank compare on interest?
The Tesco Bank Current Account can be beaten if you’re chasing the best rates.
The Nationwide FlexDirect offers a market leading 5% interest for 12 months on balances up to £2,500.
This means in one year you could earn £125 or £250 if you were to open a single and joint account and spread £5,000 between the two.
However, the rate is only guaranteed for one year and will fall to just 1% after this time.
Elsewhere, the Bank of Scotland Classic Account with Vantage pays an equally good 3% variable interest but on balances from £3,000 up to £5,000.
This means the account could return £150 or £300 if you were to open both a sole and joint account and spread £10,000 between the two.
The change will mean returns will fall to £100 on balances of £5,000 or £200 if both a sole and joint account are opened and £10,000 split between the two.
However, the rate is set to be cut from 11 June 2017. The bank is replacing the current tiered rates with a single interest rate of 2% on credit balances between £1 and £5,000.
If you have a bigger pot, the Santander 123 Current Account is still the best as you can earn 1.5% on balances up to £20,000.
That means you can pocket £300 (£240 after you factor in the monthly £5 fee) in one year, or £600 (£540 after the fee) if you have £40,000 to spread between a single and joint account.
That said, the rate on the 123 Current Account is also variable so could be cut further.
Read: The best high-interest current accounts for more.
Is Tesco Bank safe?
Tesco Bank was hit by a cyber-attack in November last year. Hackers managed to steal £2.5 million from accounts, which the bank has since refunded.
Tesco Bank’s chief executive Benny Higgins denied the move to guarantee rates was an attempt to lure customers following its security breach.
He said: ‘This is something we have been planning on doing for a long time. When we spoke to customers, there was anxiety over the threat of repeated cuts to rates.
"We have removed the burden of uncertainty for customers by guaranteeing we will not change the rate for the next couple of years."
Higgins offered reassurance for new and existing customers, adding: ‘We have spent a lot of time focusing on making sure we have got the best preventative detection we can in place.'
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