M&S challenges banks with new current account

Marks & Spencer has thrown down the gauntlet to the big banks by unveiling details of its new packaged current account.

After weeks of bad news for the banks following technical glitches at RBS and NatWest, as well as the ongoing Barclays’ rate-fixing scandal, M&S is aiming to capture customers looking for alternative homes for their money – but its new account comes at a price.

Here, we look at how the M&S Premium current account works, and who it is likely to be suitable for…

What’s on offer?

Although you can’t actually apply for the M&S current account now, you can pre-register ahead of the account’s official launch in October.

The M&S Premium account is a ‘packaged’ account, which means accountholders receive a range of benefits return for a monthly fee.

For a monthly fee of £20, accountholders receive over £500 worth of annual benefits, including M&S vouchers, hot drinks vouchers for the M&S Café, as well as a birthday gift and seasonal treats.

Accountholders also benefit from worldwide multi-trip family travel insurance, including winter sports cover, provided they are under the age of 70. Those who wouldn’t use this benefit, or who aren’t eligible because of the upper age limit, can opt to exclude it and pay a lower monthly fee of £15.

Accountholders also get an additional 12 vouchers for 20% off M&S shopping (worth up to £600) in the first year if they switch their account, and loyalty points on debit card purchases made at M&S, both in store and online.

Furniture and electrical items are excluded from the 20% off offer.

Financial benefits

As well as the insurance and money-off vouchers, M&S current accountholders get an automatic £500 overdraft limit with the first £100 interest-free.

There are no overdraft fees and customer will receive free text alerts when the overdraft limit is approached.

The debit card is likely to be particularly attractive to regular travellers, as there are no card charges for withdrawing cash from an ATM abroad.

While the current account doesn’t pay any interest if you are in credit, you do get access to a monthly savings account which pays a fixed rate of 6.00% annual interest (EAR) before tax.

You must pay between £25 and £250 a month into the savings account by direct debit from your M&S Premium account, and you cannot get access to your money during the one-year fixed term without closing the account and losing the 6.00% interest (interest will instead be paid at the lower prevailing rate of the M&S Everyday Saving account).

If the full £250 per month is paid in for a year (£3,000), the interest earned over the period will amount to over £90, says M&S.

Kevin Mountford, head of banking at MoneySupermarket said: “This account has been designed specifically for M&S customers, who understand and appreciate the brand.

This is definitely a product from a brand that knows its customers. The new account launch will coincide with the launch of the M&S Money stores and they hope to capitalise on the recent wave of anti-bank sentiment.”

Alternative packaged accounts

While the M&S current account looks like a good deal for people who regularly shop there and who will be able to make the most of all the benefits on offer, non-M&S customers are likely to want to consider different options.

There are plenty of packaged accounts to choose from that offer a wide range of benefits. The Co-operative Bank, for example, offers two packaged accounts, the Privilege account, costing £9.50 a month, and its Privilege Premier account, which costs £13 a month.

The Privilege account comes with worldwide family travel insurance, mobile phone insurance, an automatic £200 interest-free and fee-free overdraft, access to exclusive mortgage deals and  20% off your first year's premium on home insurance provided by Co-operative Insurance.

The Privilege Premier account offers all these benefits, but also comes with RAC European and UK breakdown cover, plus a £300 interest-free overdraft.

Halifax’s Ultimate Reward account costs £10 a month and comes with AA breakdown cover including Home Start, as well as travel insurance and mobile phone insurance provided you deposit £1,000 into the account every month. If you pay in less than this in any month, the fee for that month will be £15.

Other packaged accounts worth considering include Royal Bank of Scotland’s Royalties Gold Account, which costs £12.95 a month, but comes with up to £1,089 worth of benefits including mobile phone insurance (including iPhones), Green Flag car breakdown cover, annual worldwide multi-trip travel insurance including winter sports, complimentary access to UK airport lounges and home emergency cover.

If you are not satisfied with the benefits within the first 60 days of opening this account, you will be entitled to a refund of the monthly fee.

The NatWest Advantage Account has the same monthly fee of £12.95, but comes with a slightly lower level of benefits which include mobile phone insurance, Green Flag car breakdown cover, annual worldwide travel insurance with winter sports cover and savings of up to 10% on Thomas Cook holidays and flights.

NatWest also offers a Select Silver account which costs £8 a month and comes with European travel insurance including winter sports, mobile phone insurance, three LOVEFilm DVD rentals a month and five hmv digital music downloads a month.

Whichever packaged account you go for, make sure the benefits on offer are appropriate for your needs.  

Kevin Mountford said: “Fee-paying accounts are now very much part of the UK’s financial landscape, but as with any paid for service, consumers need to consider if they will benefit from the add-ons.

Consumers need to work out whether they will use the additional benefits and ensure that the benefits are suitable and take note of any exclusions that may apply.”

Best free accounts

If you don’t want to pay a monthly fee for your bank account, then there are plenty of ‘free’ accounts available, many of which still offer attractive benefits.

The Nationwide FlexAccount, for example, comes with free multi-trip annual European travel insurance and offers a 0% overdraft rate (EAR) for the first three months. You must pay in £750 a month to qualify for this account.

Other accounts which don’t charge a monthly fee and are worth a look include First Direct’s 1st account, which offers an attractive £100 switching incentive and a £250 free overdraft.  If you aren’t happy with the account and want to move within the first 12 months, the bank will give you another £100.

You must pay in at least £1,500 a month to qualify for this account and you won’t earn any interest when you are in credit.

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.

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