Marks & Spencer is seeking to spread its 'cut above the rest' branding to the lucrative world of banking with the imminent launch of a new current account (backed by HSBC). But with annual charges of up to £240 do customers stand any chance of getting a decent deal?
The M&S Premium Current Account comes in two flavours, an account costing £15 per month promising various 'extras' in return and another costing £20 per month which also includes worldwide family travel insurance. Both require you pay in a minimum of £1,000 per month.
M&S usually excels at customer service and I wouldn't expect its bank to be any different - after all, it has to protect the mother brand. And, for some, maybe this alone is worth the hefty annual fee - especially if they're not internet banking converts who still use branches and call centres (the M&S call centre will be based in the UK).
But for most, the decision rests on whether the various extras more than justify the monthly fees - because ultimately you'll be paying for a plain vanilla current account with some sweeteners thrown in. Let's take a look at each in turn:
Nice and simple with no overdraft fees. The first £100 of overdraft is interest free, after which 15.9% interest is charged up to the £500 limit. The interest rate is high, but still below the 19.5% market average. I doubt prospective customers will rely heavily on overdrafts, but the lack of fees is welcome.
No debit card charges ATMs abroad
Useful if you travel frequently as it could save around 2.5% (often with a £3 minimum) on withdrawals. However, not as good as cards like Halifax Clarity or Sainsburys Gold which also remove foreign currency 'loadings' of around 3% on both spending and cash withdrawals.
Hot drinks vouchers
48 vouchers for a hot drink at in-store cafes. These are apparently worth £127, although you'll probably end up spending more than this on cakes and snacks to accompany your free drink.
Treats & Delights vouchers
4 vouchers which M&S values at £45. No details yet of exactly what treats or delights you'll get, but probably high margin stuff which ultimately costs M&S a lot less than £45. Again, nice if you'd bought the items anyway otherwise of little value.
£40 of M&S vouchers. Welcome if you'd spend the money at M&S anyway
A free gift on your birthday valued at £10. Nice if it's something you'd bought anyway, but potentially pointless.
6% Savings Account
You'll have access to a savings account paying 6% interest on a monthly saving between £25 and £250 over 12 months. If you want to save spare monthly cash anyway it's a good deal (although other banks often offer similar deals), but bear in mind it's equivalent to 3.2% interest on a lump sum over the year - competitive but not earth shattering.
M&S Reward Vouchers
For every £1 you spend at M&S on your debit card you'll get 1 reward point, notionally worth 1p. So you'll effectively get 1% cash back on your M&S shopping (provided you use your M&S debit card)to spend at M&S in future. Alternatively, you could just use a cash back credit card (e.g. Amex) and get real cash rather than vouchers.
A worldwide annual travel insurance policy covering you, your partner and children/grandchildren (provided they're under 18). However, excludes anyone aged 70 or over. This is a good policy and would probably cost around £100 a year if you tried to buy similar cover elsewhere, so well worth an extra £5 a month if you need family cover.
Discount vouchers if you switch your current account (1st year only)
Move your banking across to M&S and you'll receive 12 vouchers (1 per month), each giving 20% off a M&S spend of up to £250 - food and electrical items excluded. Worthwhile if you plan to spend a lot on clothes and household furniture/items.
Ignoring the discount vouchers, M&S estimates these goodies are worth £337 a year, rising to £582 with the travel insurance. Of course, they're exaggerated using the old trick of assuming you'd otherwise pay top whack for travel insurance, so how much are the extras really worth?
Let's ignore the overdraft, savings account and debit card cash back/foreign ATM fees, as they may not apply to everyone and you can get similar deals elsewhere.
Assuming you're a regular M&S shopper who likes a hot drink and would use the various vouchers you'll probably get around £220 of annual benefit, rising to £320 if you chose the travel insurance option. And if you plan to use the discount vouchers you could obviously save a lot more over the first year. This compares to an annual cost of £180 and £240 respectively, so the account looks reasonable value.
But, if you don't much care for the hot drinks the likely benefit falls to around £95 and £195 respectively - and even less if you don't use the various vouchers or like the birthday gift. A far from compelling deal.
This is clever M&S marketing, the hot drinks and other vouchers cost them a fraction of the retail price, so M&S is likely quid's in (via the annual fee) before they even start making money from current account deposits (on which they pay no interest).
Die hard M&S customers may benefit overall if they'd spend the hot drink/voucher money anyway. But for the rest of us this account is likely to prove poor value unless you place a high price on customer service, which is likely to be excellent.