Spotlight On: Tesco's fixed rate saver

The deal

Tesco Bank's new fixed rate saver pays 2.95 per cent over one year and 3.5 per cent over two years.

Good points

The interest rate is reasonably competitive and it can be opened easily by phone and with a debit card. The account offers a degree of flexibility with interest paid monthly, annually or at the end of the term.

Bad points

Minimum balance is £2,000. With rates expected to rise by next spring, the interest could soon look less competitive than it does now, but cash must be locked away for 12 months or two years.

Conclusion

The most interesting thing about this account is that it is Tesco Bank's first new offering since it was bought out from RBS two years ago. The next step is for Tesco to move into current accounts and mortgages, which should shake up the market. This account won't make that much impact, but could be worthwhile if you have savings elsewhere earning little. However, over one year you could get 3 per cent at Northern Rock and over two years the Halifax pays 3.55 per cent.