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M&S banks on appeal of free drinks and birthday gifts
New M&S current account to cost £20 a month and offers travel insurance, an automatic £500 overdraft and various M&S vouchers.
by Victoria Bischoff on Jul 18, 2012 at 11:45Follow @VBischoff
Marks and Spencer today revealed plans to charge customers £20 a month – £240 a year – for its first ever current account.
In return for the monthly fee customers will be rewarded with a number of benefits, including travel insurance, an automatic £500 overdraft (£100 of which is interest free) and a whole host of M&S discount vouchers. Or, if you ditch the travel insurance, you can have the same account for £15 a month.
M&S (MKS.L) is also offering customers its own version of a switching bonus – 12 vouchers for 20% off M&S shopping to use in the first year, which the retailer claims have a value of up to £600 – and exclusive access to an M&S regular savings account paying 6% AER.
Customers can register their interest now, but the account itself will not be launched until October. To be eligible customers must be over 18 and under 70 (to qualify for the travel insurance) and be able to pay in at least £1,000 a month. Customers will also be tied into the account for a minimum of 12 months.
In a bid to be completely transparent M&S, has provided a full breakdown of the account’s benefits:
|With travel insurance||Without travel insurance|
|48 M&S hot drinks vouchers||£127||£127|
|4 Treats and delights vouchers||£45||£45|
|Approximate interest earned from savings account||£96||£96|
|M&S reward vouchers (debit card only)||£19||£19|
M&S announced last month that it has plans to open more than 50 bank branches in the next two years and begin offering customers current accounts and mortgages. Over three million customers already use M&S Money products, which are provided by HSBC, including credit cards, loans and savings.
First, it’s expensive. According to Defaqto, the average monthly packaged current account fee is £15, which is what the M&S account costs without its most valuable benefit, the travel insurance.
What’s more, you can get travel insurance cheaper elsewhere – Nationwide offers its customers a free European annual policy, while Barclays (dare I say that name) allows its customers to pick the products they want and has a travel package for just £8.50 a month. However, it’s worth pointing out that M&S’s insurance is worldwide, so its value does depend on where you usually travel to. It also covers the whole family if you travel together – even your grandchildren.
First Direct, meanwhile, which is also an HSBC brand, offers its customers an interest-free overdraft worth up to £250 on an account you don’t have to pay for – plus you get a £100 cash switching bonus.
This means that if you’re not an avid M&S customer this account is definitely not for you. In fact, I'm not sure that even if you are a true M&S loyalist this account is for you either.
Looking solely at the M&S discount vouchers, these are worth £241 – almost exactly the same price the account costs. Use your credit card and not your debit card and this falls to £222. Personally, I’d rather have this money in cash and retain the choice to shop and drink hot beverages somewhere other than M&S.
M&S should get points for its transparent pricing structure, but the account itself seems unnecessarily complex. Take its switching bonus for example – the 12 20% off vouchers. You can only use one voucher a month, on a maximum spend of £250 and not when buying furniture or household electrical items. I think I’d rather bank the £100 switching bonus from First Direct.
Then there is also the issue of packaged current accounts themselves. The FSA is currently investigating the market after warning that while some people get value from this type of account, many are simply being flogged an account they don’t need. According to price comparison uSwitch, just three in 10 packaged account holders use the benefits regularly.
One thing I do like is that M&S has said it will not land you with any excessive bank charges if you go over your overdraft and you can sign up for free text alerts when you're approaching your limit.
The banking industry is in desperate need of a shake-up and new entrants into the market should be welcomed with warm, loving, open arms. For me it’s just a shame that M&S’s first stab at a current account is an expensive packaged account and what's more one that falls woefully short of its competition.
But as uSwitch points out, while M&S may only be dipping a toe in the water with this account, if it goes well hopefully M&S will expand beyond its most loyal customers and give the high-street banks something to think about.
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