What’s the deal?
From 5 January 2016 customers transferring their current account to M&S Bank via the Current Account Switching Service (CASS), including two active direct debits, will receive a £100 M&S Gift card, plus an extra £10 per month (credited to the gift card) for each of the first 12 months as long as they pay in a minimum of £1,000 each month and have a minimum of two direct debits set up.
Additionally, customers who switch to the M&S current account have the opportunity to open a linked monthly savings account paying 6% AER and if they save the maximum £250 per month they can earn interest of £96.63 gross in 12 months.
The first year earning potential of £316.63 is made up of £100 initial gift card, 12 x £10 monthly gift card credits and regular saver interest of £96.63 gross.
The existing current account customer benefits of a £500 automatic overdraft (first £100 interest free) and reward points on debit card spend in M&S stores and online still apply.
Is there a catch?
There’s nothing buried in the small print to trip you up, however to qualify for the £10 per month reward you are required to pay in at least £1,000 each month – and switch via CASS with two direct debits – if you don’t pay in £1000 one month you don’t receive the £10 gift card credit for that particular month but are still eligible for future monthly credits if you meet the monthly minimum credit criteria and maintain two active direct debits.
It is also worth pointing out that the £10 per month incentive is for the first year only and customers should always consider the suitability of any current account over the longer term based on the way they run their day to day finances.
How does the M&S Bank incentive package compare?
As an overall first year incentive the M&S Current Account gives you the chance to earn more than any of its competitors when looking at a the combined value of switching incentive, first year incentive and monthly savings interest. This doesn’t take account of the reward points you can earn on M&S Debit Card spending.
This research, commissioned by M&S Bank to show how the M&S Current Account stacks up against its peers, not just in terms of switching offer, but also other key bank account elements, assumes a credit balance of £3,000. However, you’ll see from the data tables attached, that M&S Bank also represents the best year one deal for in credit balances of £1,000 and £2,000.
For customers looking to maintain a much larger credit balance, Santander 123 would pay more than M&S in the first year; however to achieve this you’d need a balance of £12,500 plus to top the M&S bank return.
If you’re someone who uses an overdraft the competitive 15.9% EAR borrowing rate (first £100 interest free) makes the M&S Bank current account the second most competitive for borrowing costs when assessed against a range of borrowing scenarios for agreed overdrafts of between £400 and £2,000 and for borrowing periods of between 4 and 12 days per month.
The increase in current account rewards and incentives
A fiercely competitive UK current account has seen an increase in the use of incentives and rewards by banks and building societies to win new customers.
Initial switching payments of between £100 and £150 have become more prevalent in recent years but we’re also now seeing more banks turning to a rewards package subject to signing up for an account with a monthly fee.
Santander and NatWest both offer current accounts which offer rewards of up to 3% on utilities payments (subject to paying a monthly fee) – these rewards haven’t been factored into the calculations for the purpose of this research as the level of net reward from utilities payments will depend on individual circumstances. For this reason, the research also doesn’t factor in the amount you could earn on debit card points earned on the M&S Current Account.
The research shows that if you meet the monthly income criteria and use the monthly savings option to the max then M&S Bank offers the greatest financial payback over the first 12 months. In subsequent years, customers who have switched to the M&S Current Account can open a new 6% monthly saver each year, meaning the account still compares favourably.
For those who dip into the red from time to time, the overdraft tariff is competitive too and second only to First Direct, so it’s a good all-rounder.
The research is intended to compare current accounts in year one, after the first year customers will need to assess whether their account (including service and convenience factors as well as rates of interest) continues to meet their needs for the longer term.
Note – This report was commissioned by M&S Bank – I was asked to evaluate its new current account switching promotion and compare it against competitor current accounts via in credit and overdraft scenarios.Photo by ell brown