Strong on service
Rather than offering market-leading deals, Metro Bank says that its strength lies in offering “unparalleled” customer service.
The bank claims it will open accounts in 15 minutes, and issue credit and debit cards then and there. If you subsequently lose your card, then it will replace it on the spot. However, all accounts must be opened in a branch, although once opened they can be managed online or over the phone.
Currently, only one branch, or ‘store’ as the bank prefers to call them, is open in Holborn, London, but another will open in Earls Court, again in the capital, next month. A further 10 stores are planned in Greater London over the next two years as part of a 200-plus store expansion plan. No decision has yet been made about which city they’ll roll out to next.
Customers will also enjoy longer opening hours than other high street banks. Metro Bank stores will be open from 8am until 8pm every weekday, from 8am to 6pm on Saturdays and from 11am to 4pm on Sundays. The only days the bank will close will be Good Friday, Easter Sunday, Christmas Day and New Year’s Day.
Not so hot on rates
But what customers gain in service, they lose in rates, as the products offered are, in most cases, a long way from being the most competitive available.
For example, you don’t earn any interest at all with the Metro Bank current account if you are in credit, so if you do tend to stay in the black you’d be better off going for an account such as Santander’s Preferred In-Credit Rate current account which pays 5% interest for the first year on balances up to £2,500 (as long as you pay £1,000 or more in each month), and gives new customers £100 cashback when they switch. Alternatively, the Halifax Reward Account pays you £5 a month assuming £1,000 or more is paid into the account each month.
If you use your overdraft regularly, the Metro account charges the same 15% interest on both authorised and unauthorised overdrafts. This is lower than the average overdraft rate but it can still be beaten. For example, Santander’s Preferred Overdraft Rate Account charges no interest on agreed overdrafts for the first twelve months and 12.3% thereafter. This account has an unauthorised rate of 28.7%.
While Metro Bank’s current account doesn’t stand out amongst the crowd, it’s a more competitive than some other deals on the market, and there is no minimum monthly funding requirement.
And Metro Bank argues that it’s about more than just rates. Certainly, it offers certain services that aren’t available at most other high street banks. For example, as mentioned above, if you lose your debit card or cheque book you can go into the store and have a replacement printed while you wait.
Packaged account perks
As well as offering a free current account, if you pay £12.50 a month, you receive some additional benefits.
The packaged account comes with Worldwide Family travel insurance with winter sports cover, mobile insurance for up to 2 phones (including smart phones), RAC breakdown cover, card protection, and identity theft support. It also offers a spare key service in London only – they look after a spare set of your car and house keys and if you lose them will get the spares out to you within two hours.
Remember that packaged accounts are only ever worth it if you make use of the benefits on offer, so if you don’t take advantage of them, you should stick with a standard non-fee based account.
Disappointing deals for savers
Metro Bank’s savings accounts don’t offer much for savers to get excited about. Its instant access savings account pays an unimpressive 0.50% on a minimum deposit of £1.
The AA’s Internet Extra account, in comparison, offers savers an impressive 2.80%, while ING Direct’s Savings Account, Tesco Bank’s Internet Saver account, BM Savings Telephone Extra account and Santander’s eSaver Issue 2 all pay 2.75%. All these accounts can be opened with £1.
The one and three-year fixed rate bonds from Metro Bank pay more competitive rates offering 2.50% and 3.00% respectively on a minimum investment of £500, but these are still a long way off the current market leaders. Bank of Baroda UK, for example, is paying 3.15% on its one year bond, which can be opened with £500, and pays savers with its three-year bond 4.30%. ICICI Bank offers the next best rates on one and three-year bonds, paying 3.10% and 4.15% respectively.
Metro Bank is also offering an account for young savers, which pays 1.00% annual interest, but again this rate can be bettered elsewhere. Northern Rock’s Little Rock Instant Access account, for example, pays 3.00% interest a year.
No cash ISA is currently available, although one will be launched in October this year.
Better news for borrowers...
Despite the low returns offered on savings accounts, Metro Bank is providing some decent credit card and loan deals. Its credit card has a low annual percentage rate (APR) of 13% on purchases, balance transfers and withdrawals. The market average rate for purchases is about 18%.
This is a flat rate, which means once you have been accepted for the card you won’t be offered a much higher rate depending on your credit history. There are no balance transfer fees or foreign loading charges, so the card looks like a great option for travellers. However, like all of Metro Bank’s products, you must go into the store to apply so this will prevent the vast majority of people from accessing it, certainly for the foreseeable future anyway.
The Halifax Clarity Card is a good alternative for those who can’t go into the London store to apply. It has a typical APR of 12.9% and no fees.
Of course, if you’re looking for a 0% deal, the Metro Bank card won’t appeal. Instead consider the NatWest Platinum Card which has a 16-month interest-free period on balance transfers (although you’ll be charged a 2.9% transfer fee), or the Barclaycard Platinum with Purchase which has 12-month 0% periods on both balance transfers and purchases. The transfer fee on this card is also 2.9%.
Metro Bank’s loan also looks good, particularly if you are wanting to borrow smaller amounts. It has a flat rate of 10% and you can borrow between £1,000 and £25,000.
It can still be beaten though. For example, Sainsbury’s, the current market leader, charges a typical APR of 8.8% if you wanted to borrow £3,000 over five years. Sainsbury’s offers a lower rate of 7.8% on loans of £7,500 or more. You need a Nectar card to qualify for these deals.
...but mortgage offers less attractive
There are plenty of mortgage deals which beat those offered by Metro Bank. Its two-year variable rate deal is currently 3.5% and is linked to the bank’s standard variable rate and is only available if you have at least a 40% deposit to put down. All Metro Bank’s mortgage deals have a £500 fee and you pay 1% more on loans where you have a deposit of between 20% and 40%.
However, First Direct is currently offering a lifetime tracker at 1.79% above the Bank of England base rate of 0.5%, giving a current payable rate of 2.29% to those with a deposit of 35% or more.
Metro Bank is also offering two and three year fixed rate mortgages at 4% and 4.5% respectively, again if you have at least a 40% deposit to put down. In the fixed rate arena, HSBC is currently offering a two-year deal at 2.69%.
This deal similarly requires a 40% deposit although there is a hefty £1,499 booking fee. For those looking for a three-year fixed rate, Leeds Building Society is offering a rate of 3.65%, although you have to take out home insurance at the same time to qualify for this rate and there is an arrangement fee of £999.
If you're confused about which mortgage to go for then speak to a qualified adviser.
Worth considering for service, but not if you’re after the best deals....
In conclusion, Metro Bank may be worth a look if branch-based banking and a high level of customer service are your top priorities, but if it’s the best rates of interest on your savings or a competitive mortgage you’re after, you’ll need to look elsewhere.
Kevin Mountford, moneysupermarket.com’s head of banking, said; “Metro Bank’s launch must be welcomed, as we have seen a lot of consolidation in the sector over the last eighteen months and more competition can only be good for consumers. However, unlike Tesco and Virgin which have the ability to create large scale banks relatively quickly, Metro has a difficult task on its hands as it has to build a brand – and customer base – from scratch.
“Service is important but customers will need to ensure they are getting the best deals available and the right products for their needs rather than being fooled by the sparkling new shop front and traditional banking approach."