M&S Bank launches this summer. If only its savings rates were as delicious as M&S ice cream....
M&S Food Hall: it’s not just a supermarket; it’s a Savingschampion.co.uk shrine to deliciousness. Our dream is to shop there every day, every week.
A diet of Jubilee-themed prawn cocktail crisps and Blueberry Cheesecake Bliss ice cream won’t do our diets any good. However, will M&S’s move into banking fatten up or slim down our savings?
Its current savings rates are not the tastiest on offer.
Last week, M&S announced plans to open its own in-store bank branches: fifty of them; open seven days a week during store opening times.
M&S Money will become M&S Bank this July when the first branch opens at M&S Marble Arch, down near the end of Oxford Street. The bank will eventually then add current account and mortgage facilities to its existing product range.
Sounds good so far!? OK, so if we were being a little bit snobby we’d admit that an M&S account simply sounds classier than a Tesco one. However it’s not all about the brand, the rates are just as important to savers, so will it deliver?
It is worth noting that M&S Bank products will be provided by HSBC, just in better clothing.
The bank already provides the banking bits to M&S Money and M&S delivers brand-trusting clients to its door, so to speak.
So how do the current M&S savings deals stack up?
Its Everyday Savings easy access account is fairly weak for new customers. It pays 2.35%, including a one year 1% bonus.
Santander, the Post Office, ING Direct and Derbyshire for example all pay 3% or more on their easy access accounts.
That said, it is worth noting that many of today’s easy access best buys include whopping bonuses. Underlying rates are dismal if you cut out Santander’s 2.70% bonus and the 2.61% dangled at new ING Direct customers.
That means the M&S easy access account is a poor payer in the first year but could be a little better as time goes by, when compared to those mentioned above.
M&S fixed rate customers fair better. Yet even they could get more interest elsewhere. Its fixed rates for ISA and non-ISA customers range from 3.25% over one year to 3.75% for three.
Cahoot (part of Santander) will pay 3.60% for its one year fixed rate bond. BM Savings, or Birmingham Midshires as we know it better, pays 4% for its three year fixed rate bond.
M&S Advantage Cash ISA (easy access) pays 3%, placing it in spitting distance of a best buy position however this doesn’t come with the hefty bonus that we’re all too used to for best buy savings accounts. Better still it allows transfer from previous ISA balances.
Although it loses its best buy spot to the Post Office in the variable rate ISA best buys, which pays a cheeky 0.01% more, that 0.01% gain with the Post Office is soon wiped out. The Post Office’s 1.26% bonus lasts 18 months with the rate dropping to 1.75% (assuming the variable rate doesn’t change within that time).
And to further compare, Cheshire Building Society offers 3.35% on its Direct Cash ISA issue 3, but it won’t allow transfers from other providers and again comes with a large bonus. 2.35% until 30/11/13 to be exact.
Whilst M&S rates may not be market leading, they are nowhere near the worst.
And they are certainly better than the Cash e-ISA, Flexible ISA and Fixed Rate deals that ordinary HSBC customers get. So evidently HSBC is willing to pay extra to entice M&S’s not-so-ordinary customers.
It is worth remembering too that M&S Money has its own FSCS banking licence, separate from the shared arrangement that covers HSBC and First Direct.
Fingers crossed, M&S Bank will come up with some more sparkling rates by launch time.