Post Office current accounts launched
Post Office has launched three day-to-day bank accounts, including the Standard Account, Packaged Account and Control Account.
It is aiming to revolutionise the current account market with its offering of "fair and transparent" products with no hidden charges.
"What you see is what you get – no surprises, " said Nick Kennett, Post Office's director of financial services.
He added: "Consumers tell us they feel penalised by complex and expensive bank charges and fees.
"When they go overdrawn they often don't realise how much it will cost and this can have a real impact on their finances."
The Post Office, working in partnership with Bank of Ireland UK, announced its first foray into the current account market last month, adding to the mortgages, saving accounts, credit cards and insurance products it already offers.
Initially the new current accounts will be trialled across 29 branches in East Anglia before a wider rollout nationwide in 2014.
So what's on offer?
The Standard Account is a typical current account that comes with a debit card and can be set up with a minimum deposit of £100. There are no charges for unauthorised overdrafts and an interest rate of 14.9% EAR levied on authorised overdrafts, which puts it "amongst the most competitive on the market," said Andrew Hagger from Moneycomms.co.uk.
The Packaged Account gives customers benefits, such as multi-trip travel insurance and car breakdown cover, for a fee of £8 per month. However, Kevin Mountford, head of banking at MoneySupermarket, points out: "The insurance cover is limited to just Europe, and as with all packaged accounts customers need to make sure they maximise all of the benefits to get the most out of their monthly fee."
The Control Account has a monthly fee of £5 but will ensure you do not face any unauthorised fees or unpaid charges, such as direct debits or standing orders. Mountford says, this account "may be a good starting point for people who have struggled to manage their finances in the past".
What's the verdict?
"There's nothing particularly exciting with these products, but then many people are just looking for something that does the job, no bells and whistles, just a no-nonsense account without hidden or excessive fees, all backed up with consistently good customer service and a system that doesn't keep falling over due to IT issues," says Hagger.
While Mountford adds: "It is important that anyone looking to open an account consider the benefits on offer and look at alternatives as these accounts aren't among the market leading offers currently available, and don't offer some of the incentives available on other accounts such as credit interest and interest free overdraft facilities."
According to Find the best bank account with Moneywise Best Buys, our comparison service, the best buy current account is First Direct 1st Account, which offers new customers £100 on switching, if you set up two direct debits or standing orders and transfer £1,000 per month into the account in the first three months.
The next best current account around is Nationwide's Flex Direct, which offers customers a 5% interest on balances up to £2,500, and gives a fee-free overdraft in the first year.
A recent poll Moneywise reported showed a third of people would consider switching to their banking to the Post Office, because of a lack of trust in the main banks.
A current account that charges a monthly fee in return for a “package” of additional services, such as travel insurance, credit card protection, mobile phone insurance, identity theft insurance, car breakdown cover or a “concierge service” that will book airline and theatre tickets or restaurant tables. However, many consumer experts say the features are overpriced and that more competitive deals exist elsewhere in the market and that very few packaged account holders actually take advantage of the features.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.