Money Insider: Post Office prepares to deliver a fresh option in current accounts


Will the Post Office's foray into the current-account market really shake up the retail banking sector, as some experts are predicting?

A pilot of current-account options will be run across branches in East Anglia, before being extended elsewhere in 2014.

In its favour, the Post Office is a trusted household name with an established network of more than 11,500 branches across the country.

But will this be enough to tempt people to switch their bank account, an area where lethargy is rife? Even though customers complain about poor service, hidden charges and hard-sell tactics, those who actually move their account still remain in the minority.

Post Office customers will have the choice of three accounts available: "standard", "packaged" and "control".

The standard account is a no-frills, debit-card product, which can be opened with a £100 deposit

There's no interest paid on credit balances, but the overdraft interest rate of 14.9 per cent effective annual rate (EAR) is among the most competitive on the market.

It's good to see that the Post Office hasn't gone down the route of daily fee charging for overdrafts, and although there will be no charges for unauthorised overdrafts, you will still be stung with a £15 fine for any unpaid items.

The packaged account charges £8 per month and includes European multi-trip travel insurance and vehicle breakdown cover. The full details of these policies have not yet been released, so it'll be interesting to see how comprehensive these add-on products are and how they stack up against competitor products.

Again, the interest rate for overdrafts is a very impressive 14.9 per cent EAR, but unless you make full use of the inclusive benefits, then you'd be better off saving the £96 annual cost and opting for the standard account.

The last of the trio is the control account, which is aimed at those who don't want to incur expensive unauthorised banking fees and unpaid charges.

This account costs £5 per month and while it gives people access to online banking, telephone banking and a nationwide network of ATMs, there is no debit card available.

Although avoiding expensive banking charges may help some people, others are likely to balk at paying £60 per year for what is just a basic bank account.

There's nothing particularly new or 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 suffering IT problems.

From September, the new, seven-day switching rules begin. I'm yet to be convinced that it's the time it takes people to switch that's holding them back. I think it's more to do with the perceived fear that payments may go astray during the transfer process.

If I'm wrong, and disenchanted, high-street bank customers start switching to the Post Office in their droves, let's hope there is sufficient staff resource available to handle the extra footfall in branches.

With so many customers disillusioned with their current bank, there's a huge pot of new business just waiting to be convinced that the Post Office is a better-banking alternative.

There's no reason why it shouldn't become a major competitor in the current-account market, but much will depend on its ability to build a reputation for reliable customer service across its huge network of branches.

Better deals on offer for first-time buyers

According to the Council of Mortgage Lenders, 19,100 mortgages worth £2.4bn were advanced to first-time buyers in March. This is a big improvement on the previous month, and with a raft of new, lower-rate mortgage deals for first-time buyers announced this week, the trend may continue through the summer.

The new deals just launched include a two-year, fixed-rate mortgage from Santander at 4.59 per cent to 90 per cent loan-to-value (LTV) with no fee and £250 cashback, a 3.99 per cent, three-year fix from First Direct to 90 per cent LTV with £999 fee, and 5.49 per cent from Clydesdale and Yorkshire Bank for a three-year fix to 95 per cent LTV with no fee.

Andrew Hagger is an independent personal finance analyst from