Fee paying banking will be a very tricky sell

MARKS & SPENCER ruffled some feathers last week when it announced that it would be charging for the use of its current account – between £15 and £20 a month, depending on whether you want insurance included. In return, customers will receive vouchers for free hot drinks in M&S cafés, M&S vouchers worth £40 and the convenience of in-store opening hours. The account will yield zero interest, but M&S offers customers access to a a regular savings account paying 6 per cent interest. M&S Money – a wholly owned subsidiary of HSBC – will offer the account from October, and is hoping to capture a swathe of Marks & Spencer’s large and loyal customer base. Though banks offering fee-paying – or packaged accounts as they prefer to call them – is nothing new, M&S will be the first to shun free accounts completely.

The idea of paying for a bank account will come as a bit of a culture shock to the average UK consumer who has come to expect free banking – a result of the price war in the 1980s. But as more banks start to roll out fee-paying accounts across the board, is it worth it? “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’,” says Kevin Mountford, head of banking at MoneySupermarket. “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.” M&S values the benefits of its £20 a month account – which includes family travel insurance – at £500 a year. But of course, this is only worth it if you actually use and need all of what’s on offer. If you’re desperate for M&S gift vouchers and a birthday gift from the bank, then the £240 annual fee may be worth it.

M&S Money is not the only one offering packaged accounts. Every major bank has its premium or gold packaged account. Santander’s 123 current account might be worth a look. For £2 a month, customers receive 1 per cent cash-back on water and council tax bills, 2 per cent on gas and electricity bills and 3 per cent on phone and TV packages.

Some are pushing for the government to regulate free bank accounts out of the market. But as long as they exist, it will take a lot to convince consumers that taking advantage of a fee-less account and buying travel insurance and M&S vouchers with the money they save isn’t a better option than stumping up for the less flexible privilege of a packaged account.