Barclays to acquire Tesco Bank – here’s what you need to know if you’re a customer

The £600 million deal will include Tesco Bank’s credit card, loan and savings business. We explain what it means if you’re a customer – and some things to keep an eye on in the coming months.

Retail Banking Industry: Tesco Bank
(Image credit: NurPhoto / Contributor)

Barclays is buying Tesco's retail banking operations in a deal worth £600 million. 

The pair referred to it as a “strategic partnership”, which will see Barclays take over Tesco Bank’s credit card, loan and savings business – but not its insurance, ATMs, travel money or gift card services.

The announcement comes just over a year after Tesco Bank closed its current account business in November 2021, and around four years after the firm announced the sale of its mortgage business to Lloyds Banking Group in September 2019. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Tesco Bank has said “there is no need for customers to take any action at this time” and that it will “be in touch with them over the coming months”. 

Barclays has also confirmed there will be no changes for its customers.

In the meantime, here’s a round-up of some key things to keep an eye on.

What’s happening with Tesco Bank?

Although Tesco’s credit card, loan and savings business will be sold to Barclays under the plan, the products will retain the Tesco brand. 

Ken Murphy, Tesco’s CEO, said the transaction will unlock “greater value for customers and for our business”, as well as helping to deliver “new and innovative propositions”. 

The announcement specifies that the strategic partnership between Barclays and Tesco will last for “an initial period of 10 years”. The sale is expected to take place in the second half of 2024.

Why is Tesco selling its banking business?

Supermarket banks have had a challenging time over the past few years, and the decision from Tesco Bank is by no means an outlier. Sainsbury’s is also looking to move away from its banking business, having indicated earlier this year that it is open to offers.

The move comes as many supermarkets are opting to focus on their core grocery business. For several years now, they have faced fierce competition from discount retailers like Lidl and Aldi, which have only increased their popularity with many shoppers amid the cost of living crisis. 

Murphy’s statement added that the deal would “significantly reduce [Tesco’s] financial liabilities, in turn strengthening our balance sheet and allowing us to focus on continuing to grow our core retail business”.

Are my savings with Tesco Bank safe?

Tesco Bank has said that customers do not need to take any action following the announcement, and has framed the decision as a positive move. 

Furthermore, both Tesco Bank and Barclays are covered by the Financial Services Compensation Scheme (FSCS), which means that deposits of up to £85,000 are protected. 

In other words, in the unlikely event of either bank going bust or running into financial difficulties, savers would be compensated for any losses up to the value of that amount. 

For this reason, it is generally good practice to open a second savings account with a different bank once the balance in your account reaches this limit. 

One important thing to watch out for, though, is that some banking brands are owned by the same legal entity – and FSCS protection applies to the legal entity rather than the brand. 

So, once the deal between Tesco Bank and Barclays goes through, if you already have an account with both of them, make sure your savings across the two brands do not exceed £85,000 in total.

Does Tesco Bank offer good savings rates?

At the moment, Tesco Bank offers two easy-access savings accounts – its Internet Saver and its Instant Access Cash ISA.

Swipe to scroll horizontally
AccountInterest rate during first 12 monthsInterest rate after 12 monthsMinimum depositEasy access?
Internet Saver4.75% Gross / AER (variable)1.25% Gross / AER (variable)£1Yes
Instant Access Cash ISA4.30% Gross / AER (variable)1.25% Gross / AER (variable)£1Yes

The starting rate on both is fairly competitive, although you can get rates of up to 5.2% elsewhere on other easy-access savings accounts, and up to 5.09% on other easy-access cash ISAs. 

Furthermore, the interest rate drops dramatically after 12 months – a poor reward for customer loyalty. Although savings rates are likely to fall over the next year once the Bank of England starts cutting the base rate, they are not expected to fall by that amount. 

If you are willing to lock your cash away for a little longer, Tesco Bank also offers six fixed-rate savings accounts. Here’s what you can earn with them compared to elsewhere. As always, it is worth shopping around to secure the best deal.

Swipe to scroll horizontally
Type of accountTesco rate (AER)Best deal elsewhere (AER)
1-year fixed rate saver4.80%5.21% (SmartSave)
1-year fixed rate cash ISA4.75%5.25% (Virgin Money)
18-month fixed rate saver4.50%4.98% (Charter Savings Bank)
2-year fixed rate saver4.30%5.10% (AIB)
3-year fixed rate saver4.15%4.61% (SmartSave)
5-year fixed rate saver3.80%4.50% (Isbank)
Katie Williams
Staff Writer

Katie has a background in investment writing and is interested in everything to do with personal finance and financial news. 

Before joining MoneyWeek, she worked as a content writer at Invesco, a global asset management firm, which she joined as a graduate in 2019. While there, she enjoyed translating complex topics into “easy to understand” stories. 

She studied English at the University of Cambridge and loves reading, writing and going to the theatre.