Tesco’s banking arm has launched a prepaid debit card with a linked savings account that is available to the 20 million customers who hold one of the retailer’s Club cards.
The new offer, called Tesco Clubcard Pay+, is designed to help people budget and save, the company said. You can top up the debit card from any UK bank account.
The Clubcard Pay+ is not designed to be used as a main bank account and should not be confused with a current account in its own right. It doesn’t have an overdraft, you can’t set up direct debits, and there are fees to be aware of.
Customers get a payment account with a debit card that can be used anywhere Visa is accepted, as well as a savings account called Round Up.
Shoppers can add money to their Clubcard Pay+ account – allowing them to limit their grocery spending if they wish – by linking it to any UK bank account, using the Tesco app Bank.
Customers can also choose to “save while they shop” by rounding up their purchases to the nearest pound, with the difference going to the Round Up account.
This account pays 0.25% variable interest and buyers can manage it through the app. Your Round Up balance can be transferred out of your account at any time.
Several other UK banks, including Lloyds, Halifax and new digital player Chase, offer similar features that allow people to turn loose change into savings. Interest rates on these vary: some of Lloyds Bank’s eligible accounts pay as little as 0.01%, while Chase currently offers 5%.
The launch of this new way to pay comes just weeks after Tesco Bank closed all of its checking accounts.
Pay+ was initially offered to a limited number of customers last March and is now available to all Clubcard members living in the UK and aged 18 or over.
The debit card acts as a Club card.
As an added benefit, for the first 100 days after opening an account, customers receive an additional Clubcard point for every £1 spent at Tesco with Clubcard Pay+.
In addition to points collected at Tesco, you also get a Clubcard point for every £8 spent outside of Tesco (there are some exclusions).
There are a number of things Clubcard Pay+ does not allow, including direct debits and standing orders.
Also pay attention to the fact that if your account balance drops below zero – for example, if a store accepts a payment without verifying that there is enough money in your account – you will need to top it up immediately. If you fail to do so, Tesco Bank says: “We may take steps to suspend and eventually close your Clubcard Pay+ and Round Up accounts.” However, the bank will not charge you a fee for refusing or authorizing payments due to lack of funds.
The bank does not currently offer joint accounts or allow other people to be added to the account, but this may change in the future.
Not a good card to use abroad: a 2.75% foreign exchange fee applies to all Clubcard Pay+ debit card transactions made outside the UK. If you withdraw cash from an overseas ATM in a foreign currency (except Euros), you will be charged an additional 1% cash withdrawal fee.
Money held in the accounts is protected up to a total of £85,000 by the Official Financial Services Compensation Scheme.
The move represents an expansion of Tesco Bank’s financial services ambitions after it closed all of its current accounts in November last year, seven years after it launched in that market.
The MoneySavingExpert.com website states that while Clubcard Pay+ can be an easy way to earn extra points in the short term, “in the long term, it’s possible to earn a lot more in points or cashback using a credit card. with rewards, provided you only use it for normal expenses and pay it back in full each month.”