Marks & Spencer has announced that its first-ever current account will charge customers a monthly fee of up to £20 in return for "transparent" terms and a range of in-store perks.
Customers can pre-register now for the new M&S premium current account, which have an automatic £500 overdraft with the first £100 interest-free, before the launch in October.
The retailer plans to open 50 bank branches in the next two years and has trumpeted its move as "new-fashioned banking", with opening hours mirroring those of the store, meaning seven-days-a-week banking.
Unveiling details of its accounts, it said customers will be alerted by text when they approach their overdraft limit and will not be charged for using M&S Bank debit cards in ATMs abroad.
Customers will not be hit by unexpected charges as there are no default or return fees associated with the account, M&S Bank said.
The account has been unveiled at a time when comparison websites and building societies have been reporting surges in people looking to switch accounts in the wake of NatWest's IT meltdown and Barclays' Libor-fixing scandal.
For £20 a month, the premium current account with insurance promises customers more than £500-worth of annual benefits such as M&S vouchers, hot-drinks vouchers for the M&S cafe, travel insurance, loyalty points on debit card purchases and 12 vouchers for 20% off M&S shopping in the first year if customers switch their account. Customers will also be given access to a savings account with a fixed rate of 6%.
The M&S premium account without insurance costs £15 a month and comes with similar banking and rewards and the potential to gain more than £300-worth of annual benefits.
Kevin Mountford, head of banking at comparison website MoneySupermarket, said the accounts are tailored to suit M&S's loyal customers.
"This is definitely a product from a brand that knows its customers. The new account launch will coincide with the launch of the M&S Money stores and they hope to capitalise on the recent wave of anti-bank sentiment.
"The account will not pay any credit interest, however, account holders will be able to open a regular saver account, paying a fixed rate of 6% AER (annual equivalent rate). The account also benefits from no debit card charges for ATM use abroad, which, as we approach the summer holidays, could be a big benefit for many."
The company, which expects to create 500 UK jobs from the roll-out of the M&S Bank business, said mortgages will be offered at a later date.
It already provides credit cards, loans and savings to more than three million customers under M&S Money, run as a joint venture with HSBC bank.
The Office of Fair Trading (OFT) stepped up the pressure on banks last week by launching a review into the personal current account market amid concerns over a lack of transparency and competition.
It could take "radical" action if the sector cannot show it is becoming more competitive and consumer-focused. It wants to shake up competition with credible new players able to join the market more easily.
The move by M&S will add fuel to the debate over fee-free banking, with mounting arguments that banks would be less inclined to impose hidden charges and mis-sell products if a regular fee on current accounts was already in place.
Lenders are in the process of paying up to £9 billion in compensation after a widespread scandal involving the mis-selling of payment protection insurance was uncovered.
Mr Mountford said: "Fee-paying accounts are now very much part of the UK's financial landscape but, as with any paid-for service, consumers need to consider if they will benefit from the add-ons.
"Consumers need to work out whether they will use the additional benefits and ensure that the benefits are suitable and take note of any exclusions that may apply."
Debit card rewards will be redeemed in a similar way to M&S credit cards, with loyalty points automatically turned into vouchers and sent out via post every 12 weeks. M&S Bank commissioned Sir Terence Conran to design its debit cards.
Rachel Springall, spokeswoman for website moneyfacts, said: "The M&S premium current account has been aimed at Marks & Spencer shoppers, with the main pull being money-off vouchers and in-store treats."
Colin Kersley, CEO of M&S Bank said: "With over 25 years in personal finance, our loyal customers trust us to deliver the products and services that are right for them.
"A current account is the natural next step and we have designed this product with our customers in mind."