After the PPI furore, it’s a risky time to start charging customers for nebulous ‘benefits’ attached to bank accounts. But M&S is doing just that. The high street stalwart is offering customers two kinds of premium bank account, costing £15 (without insurance) or £20 a month.
The banking service will launch October, with the first M&S bank opening its doors for pre-registrations at the M&S flagship store in Marble Arch this Thursday. The government will be pleased – after all those reports demanding increased competition in high street banking, we now have several: Metro Bank (newish, but doing rather badly, unfortunately), Virgin, and now M&S.
The latter doesn’t represent much of a shake-up however: it doesn’t have its own license. It’s backed by HSBC as a kind of affiliate model, except that all profits will be shared equally. Picture the facepalm moment when Bolland read the money-laundering headlines earlier this week…
So, what do M&S banking customers get for a score a month? Travel insurance and in-store benefits worth up to £658 a year, says M&S. This breaks down to £40 worth of vouchers, 20% off a monthly spend of £250 for the first year and free hot drinks in-store. For savers, unhappy with their miserable 3.3% or 4% Isas, M&S is offering a fixed rate of 6% on its savings account. The accounts also have an automatic £500 overdraft, with the first £100 interest-free.
The retailer plans to open a total of 50 branches in M&S stores over the next two years, creating 500 jobs by the end of 2013. And while the paid-for model may dissuade many customers from making the switch, at least M&S can rest assured that it won’t be inundated with customers and unable to cope with demand.
Premium bank accounts are hardly new, but there is a growing body of opinion that upfront charging for banking services is a better option than all the hidden fees and commissions that pertain currently. The question is, will the trend (post Vickers report, post PPI scandal) really take off? Are the days of a ‘free’ bank account well and truly numbered?