M&S to launch first fee-free current account
All M&S Current Account customers will automatically get a £500 overdraft, but after the interest-free first £100 of the facility is used up, interest of 15.9% AER will be charged on the remainder.
There are no unauthorised overdraft charges or fees for returning unpaid cheques or standing orders.
M&S Bank is also offering a golden hello to customers who switch to the Current Account using its Current Account Switch Service by giving them a £100 M&S giftcard.
Other perks of the new account include a free text alert service to warn them if they are approaching their overdraft limit; and no transaction fee for overseas ATM cash withdrawals made with the M&S debit card (although a foreign exchange charge of 2.75% will still apply).
Customers will earn loyalty points for using their debit card, earning one point for every £1 spent in M&S - in-store and online. They will then receive £1 in M&S vouchers for every 100 points earned and vouchers will be sent out each quarter.
So for every £100 you spend in M&S you will be rewarded with a £1 voucher. However, these vouchers are paid in lieu of any interest paid on credit balances.
Those who open the new account will also be eligible for exclusive offers on other M&S Bank products such as savings accounts and personal loans.
Colin Kersley, chief executive of M&S Bank, said: "Our Premium Current Accounts, developed specifically for the regular M&S shopper, have proven popular with this audience and following the launch of the Current Account Switch Service, which has made switching faster and easier, we want to offer the same transparent banking and great service to a broader audience with the launch of the M&S Current Account."
Andrew Hagger of Moneycomms.co.uk said the introduction of the M&S Bank Current Account could trigger a fresh rush of switching this summer.
"I think this deal has the potential to drive a lot of new custom from account holders with the big banks who have until now been sitting on the fence, not sure where to switch to for a better deal.
"This latest account is simple and transparent and has many positive features that should appeal to a wide range of consumers – in fact I'm struggling to find anything about it to dislike."
He pointed out that the interest-free £100 part of the overdraft is generous compared to some competitor accounts which only have "measly, charge-free buffers of £20 or less" and that the 15.9% EAR for the rest of the overdraft makes it "one of the most competitive on the market".
He added: "With Tesco Bank and Virgin Money also due to launch their bank accounts in the coming months, maybe 2014 will be the year that consumers finally have some worthwhile new options to choose from."
The new M&S Current Account will be available from the summer to existing M&S Bank customers before rolling-out more widely.
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.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.