Tesco Bank has announced it is closing all of its customers’ current accounts from the end of November, and that it will write to them in the next fortnight to advise them what they need to do.
The banking arm of the retailer launched its current account in 2014, at the time offering 3% interest on balances and Clubcard points on spending in a bid to win customers.
But the bank, which has more than 5 million customers holding savings, loans and insurance as well as everyday accounts, closed the current account to new business in December 2019.
About 213,000 accounts remain open, however it estimates that only about 12% of these accounts are being used as a primary current account, while the majority have limited activity or are being used for other purposes, such as savings.
The lender is writing to its current account customers, who will receive a letter within the next two weeks, informing them of the closure of their account on 30 November.
The affected customers will need to move their account to a different provider, or move their balance to a Tesco Bank savings account or different banking product by the end of November.
As well as traditional banking products, Tesco Bank also offers a “clubcard pay” account, which comes with a debit card and allows shoppers to pay, save and collect points in the supermarket’s clubcard loyalty scheme.
Tesco Bank’s chief executive, Gerry Mallon, said the lender wanted to offer products which align with the needs of Tesco shoppers.
“With so few of our current account customers using it as their primary account we want to support them to find a suitable alternative dependent on their circumstances. We will pay particular attention to supporting any vulnerable customers and those in need of financial assistance,” he said.
The move follows a similar announcement by M&S Bank, which plans to close its current account and a monthly savings product in August.
Meanwhile one of the UK’s other challenger banks is expanding its offering.
Starling Bank, which offers banking via a mobile phone app, has completed its first acquisition, of buy-to-let mortgage lender Fleet Mortgages, which caters to buy-to-let landlords.
The £50m cash and share purchase is part of Starling’s strategy to expand its lending.