Check out the winners in current account wars

M&S is the latest to join the fray… but there are better deals

SUPERMARKETS, high street stores and banks are locked in a battle for new current account customers – with most promising to cut borrowing fees or boost rewards.

And with new offers due to be launched in coming months, customer choice will widen further and change the way more of us bank.

We run through the key choices, the changes and how you might benefit from a new bank account.

NEW KID ON THE BLOCK

MARKS & Spencer is the latest to launch a fee-free current account. It waives fees on cashpoint withdrawals abroad and offers loyalty points for using its debit card in-store. One point is earned per pound spent and is worth a penny on redemption.

But the account stands out because of its fee-free overdraft facility. Interest is charged at 15.9 per cent a year on any borrowing over £100.

All new customers get a £500 overdraft limit as standard, but you can try asking for more.

If a payment tips your balance over the limit, which is possible as retailers don’t always ask the bank’s permission to take small sums, there is no unauthorised overdraft fee or charge if the payment is rejected.

HOW DOES IT COMPARE?

DAVID Black, of market researcher Consumer Intelligence, says the store’s regular shoppers will benefit and the overdraft is ‘clear and transparent, and good for customers’.

By contrast, M&S’s fee-charging account, launched in 2012, which offers vouchers and loyalty points, looks expensive at £10 a month, or £17.50 a month with worldwide travel insurance included.

Like rivals First Direct, Smile and Halifax, which are also battling it out for new customers, M&S offers a ‘golden hello’ – in this case a gift card worth £100 for signing up via the industry-wide ‘switch service’. This ensures your account and direct debits are transferred within seven working days. But M&S’s new account is less appealing for customers more often in the black than the red, as rivals pay interest on positive balances. Nationwide Build- ing Society’s fee-free Flex Direct pays 5 per cent on balances up to £2,500 for the first year (equivalent to a maximum of £125 before tax). And Santander’s 123 account pays 3 per cent gross interest on balances of £3,000 to £20,000. There is a £2-a- month charge for this, but it is offset by cashback for bill payments.

WHAT ELSE IS NEW?

CLUB Lloyds, launched in March, pays up to 4 per cent interest on balances up to £5,000 and offers a £100 free overdraft limit subject to approval. Customers can also put up to £400 a month into a saver account paying 4 per cent interest.

One of three ‘lifestyle benefits’ are thrown in – dining-out discounts, six Vue cinema tickets a year, or a magazine subscription. At least £1,500 must flow into the account a month, otherwise the monthly fee is £5.

Other banks are focusing on inbranch technology. Royal Bank of Scotland, which owns Nat West, last week pledged to install free WiFi internet hotspots in all 2,000 of its branches by the end of the summer. Currently 800 offer the service.

HSBC also announced it would roll out free WiFi in 650 of its branches. Barclays was first to install this technology for customers last year.

WHO ARE THE CHALLENGERS?

IT IS worth extending your search beyond the best-known names when looking for a current account. Metro Bank, based in the South-East, the Post Office, M&S, First Direct and Smile – the online subsidiary of the Co-op Bank – don’t have the history of the traditional banks but are now offering key advantages.

And some building societies, particularly Nationwide, are becoming far more prominent.

Tesco is set to launch an account in coming months, possibly before the end of June, while Virgin is running a trial with its staff, due to go public in the second half of the year.

Little-known Ffrees Family Finance is growing rapidly behind the scenes. It has opened 17,000 accounts since

its launch in October, all of which are online only. It is targeting the 60 per cent of customers who are not profitable to banks and those who struggle to get an account.

Ffrees says it does not care how much money you have and is indifferent to credit checks because it does not allow you to go overdrawn. There are four types of account, ranging from fee-free to £10 a month. Customers earn points by spending online with certain retailers. A percentage of what you spend is added to a savings account.

But the fact that Ffrees is not a bank works against its status as a challenger to the high street names as customers must pay a fee of up to 75p each time they use the banks’ cashpoint network. And you cannot yet set up direct debits.

Meanwhile, online-only start-up bank Atom is due to launch next year, but new boss Anthony Thomson, who set up Metro Bank, remains tight-lipped on details.

WHAT’S BEST FOR ME?

ANDREW Hagger of research company Money Comms says: ‘There’s not one current account that works out best for everyone.’

You might prefer to bank online or in a branch, with an established brand name or a new starter, or with a firm focused on rewarding customers or with slick service.

‘Good service is essential if new banks want to attract customers year after year and is an area where the challenger banks have a real opportunity to differentiate themselves from the patchy and mediocre service offerings from established banks,’ says Hagger.

But convenience is important too – and newer banks such as M&S and Metro Bank have the appeal of longer opening hours – including weekends. In a clever bid to entice you to spend more, M&S lets you shop while waiting for an appointment with a banker and pages you to tell you when they are ready.

Barclays is trialling seven-daysa-week-service, opening small branches in some Asda stores.

Comparison websites such as Money Super Market or u Switch can help you choose between accounts based on perks and offers. To judge a provider based on service or ethical stance, visit websites such as Fairer Finance or Move Your Money.