What’s the deal?
Customers signing up to the M&S current account – the most basic of its range – will benefit from an automatic £500 overdraft, of which the first £100 will be interest-free. Borrowing over £100 will be charged an effective annual rate (EAR) of 15.9%, with no additional fees.
Importantly – and unusually – the M&S account doesn’t charge any fees for unauthorised borrowing either. You’ll pay the same 15.9% interest rate as you would with an agreed overdraft, again with no extra charges.
You don’t have to pay in a set amount each month to qualify for this account, and there is no monthly fee.
If you switch to the M&S account using the bank’s switching service, you will receive a £100 gift card to spend at the store, which will be sent within one calendar month of the switch being completed.
Customers will also earn one loyalty point for each £1 spent in M&S whether in-store or online using their debit card. You need 100 loyalty points to qualify for a £1 voucher.
There are no cash withdrawal charges when you use the card overseas, although there is a 2.75% foreign exchange fee.
The account does not pay any interest if you’re in credit.
Kevin Mountford, head of banking at MoneySuperMarket, said: “The new M&S current account is a welcome addition to its existing range of premium current accounts and adds another string to its bow as it looks to compete with the traditional high street rivals.”
Who’s it good for?
This account is a great option for M&S shoppers as well as those who regularly dip into the red and can find it hard to stick within their agreed overdraft limit.
The M&S account is also a good deal for regular travellers, who don’t want to be hit with steep charges for using their debit card overseas.
Probably the biggest downside of the M&S current account is that, unlike some of its competitors, it doesn’t pay any interest when you’re in credit. So if you keep any kind of balance in your account, this may not be the best deal for you.
Instead, you should choose a current account which pays competitive rates of interest on credit balances. For example, Nationwide Building Society’s FlexDirect account pays 5.00% on balances up to £2,500. This rate is fixed for the first 12 months, but you must pay £1,000 a month into the account. After 12 months, rates fall to 1.00%.
TSB’s new Classic Plus account also pays 5.00% interest – but on balances up to £2,000. No interest is earned on balances above this amount and you must pay in at least £500 each month to qualify.
Santander’s 123 current account is also worth considering if you carry a high balance in your current account as it pays 3.00% AER on balances between £3,000 and £20,000.
This account also pays 3.00% cashback on spending on your mobile, home phone, broadband and paid-for TV packages, 2.00% on energy bills and 1.00% on any Santander mortgage payments up to £1,000 a month. However, the Santander account has a £2 monthly fee, and you must pay at least £500 a month into this account and set up two direct debits to qualify.
Alternatively, you can earn £5 a month with the Halifax Reward Current Account, providing you pay in £1,000 each month.
What the verdict?
The M&S Standard account is a welcome addition to the current account market, and, by doing away with steep overdraft charges, has set a challenge to other providers.
The £100 interest-free overdraft is very attractive, although it’s worth noting the first £250 is interest-free with First Direct’s 1st account. However, you must pay at least £1,000 a month into the 1st account, otherwise you will be charged a £10 monthly fee.
If you’re a regular M&S shopper, the £100 gift card switching incentive is particularly tempting, as is the ability to earn reward points on your in-store spending.
Don’t let fears that switching won’t go smoothly deter you from moving your current account to a new provider. Under new switching rules introduced last year, the bank or building society you are moving to must switch all of your regular payments over from your existing current account provider within seven days. You can find out more about current account switching in our 7-Day Switch hub.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.