Tesco joins banks cutting rates for loyal savers as internet account falls to just 0.35%
TESCO has become the latest bank to slash interest rates for loyal savers - so any money put away for a rainy day is worth even less.
The banking arm of the supermarket said that from October 24, interest on its easy-access Internet Saver account will fall from 0.55 per cent to 0.35 per cent, while its Instant Access Cash Isa falls from 0.65 per cent to 0.35 per cent.
Its Instant Access Savings rate will also drop, from 0.4 per cent to 0.3 per cent - meaning customers earn just £3 a year on £1,000.
The news comes as banks across the board slash the interest they pay customers who deposit money with them.
Nationwide recently reduced its rates on closed easy-access accounts, such as its Flexclusive Online Saver, from 0.6 per cent on balances up to £10,000, to just 0.3 per cent.
The bank’s e-Savings account now pays just 0.1 per cent, and its Limited Access Saver, Limited Access Online Saver and e-Savings Plus dropped from 0.75 per cent to 0.5 per cent.
How to chose a savings account
Here are some tips from the Money Advice Service:
- Set a savings goal - how much do you need to save, and when do you need the money?
- Know yourself when comparing rates - do you have time to keep switching for the best deals? Or should you stick with one bank?
- Use regular savings accounts or fixed term deposits - can you set up a standing order to your savings account?
- Be tax-wise - if you don't pay income tax, ask to have your account interest paid gross so tax is not automatically deducted
- Don’t keep more than £85,000 with one banking group - this is the Financial Services Compensation Scheme's protection limit
Current accounts have also been hit: TSB cut its rates on its Classic Plus account last month, from 5 per cent to 3 per cent, while Tesco Bank slashed the interest rate on its current account from 3 per cent to 1 per cent.
A spokesperson for Tesco Bank said: “Following a recent review, we’ve decided to reduce underlying rates on our savings accounts. While the rates have changed, we’re confident they’re still competitive when compared with the market."
It might be possible to get a better rate of interest elsewhere.
Inflation rose to 2.1 per cent in July, according to figures just released from the Office for National Statistics (ONS) - suggesting that savers should shop around for higher rates.
As a result, the number of savings accounts beating inflation has tumbled from 110 to just 58, according to analysts at Hargreaves Lansdown.
But despite this, data from the Current Account Switching Service suggests that only one in seven savings accounts have been switched in the past three years, so it might be time to shop around.
You can use comparison websites such as or to find the best deals.
Andrew Hagger, a personal finance expert, said: "You should avoid the big high street banks because their savings rates are poor.
"There are a lot of providers out there who people might not have heard of but they are just as safe.
"Which savings account you chose depends on what you want from your money.
"If you are looking for instant access [where you can withdraw the money at any time] then the best rate at the moment is 1.5 per cent, available with online accounts with Marcus or Cynergy Bank.
"If you are looking for a higher rate you need to lock your money away in a fixed rate deal.
"Chartered Savings Bank is currently offering 2.05 per cent if you lock your money for 18 months, and Atom Bank pays 2 per cent for one year."
Latest In Money
Even if UK interest rates rise, banks do not always pass on the increase to customers.
But there are some good deals out there.
And there are a number of savings accounts aimed at children too.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected]