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 moneycomms.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Guru Careers: FX Trader / Risk Manager

    Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

    Guru Careers: Investment Writer / Stock Picker

    Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

    Day In a Page

    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map
    Lionel, Patti, Burt and The Who rock Glasto

    Lionel, Patti, Burt and The Who rock Glasto

    This was the year of 24-carat Golden Oldies
    Paris Fashion Week

    Paris Fashion Week

    Thom Browne's scarecrows offer a rare beacon in commercial offerings
    A year of the caliphate:

    Isis, a year of the caliphate

    Who can defeat the so-called 'Islamic State' – and how?
    Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

    Marks and Spencer

    Can a new team of designers put the spark back into the high-street brand?
    'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

    'We haven't invaded France'

    Italy's Prime Minister 'reclaims' Europe's highest peak
    Isis in Kobani: Why we ignore the worst of the massacres

    Why do we ignore the worst of the massacres?

    The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
    7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

    Remembering 7/7 ten years on

    Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
    Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

    They’re here to help

    We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
    Time to lay these myths about the Deep South to rest

    Time to lay these myths about the Deep South to rest

    'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
    What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

    What exactly does 'one' mean?

    Court of Appeal passes judgement on thorny mathematical issue