The Post Office today enters into the UK current account market for the first time, launching three new accounts through a limited number of branches.
The Post Office accounts, which are backed by the Bank of Ireland, will initially be available to new customers at 29 branches of the Post Office throughout East Anglia. It plans to roll out the accounts across the rest of the Post Office network from 2014 onwards.
Which? has analysed the features of the three accounts and how they compare to the rest of the current account market.
The Post Office Packaged Account
The Post Office Packaged Current Account will cost customers £8 a month (£96 a year) in return for benefits such as European multi-trip family travel insurance, car breakdown cover and identity theft protection services. Full banking facilities are available and overdraft interest rate is currently 14.9%.
Which? Money compared this account with all packaged accounts on the market and on first look, it’s an average account. Provided you use both the travel insurance and car breakdown cover, it could be a good value account at £96 a year, but it pales in comparison to the best packaged account currently on offer from Nationwide.
When the Post Office reveals the full details of the account, we will analyse and rate it alongside our other packaged account reviews.
Post Office Control Account
The Control Account is aimed at customers who may have trouble managing their finances or have possibly incurred penalty bank charges in the past. Customers will be charged £5 a month (£60 a year), but will not incur any further charges if their direct debits or standing orders are returned unpaid due to insufficient funds.
The Control account can be opened with an initial deposit of £20 and offers full banking facilities.
Although you won’t incur bank charges if your direct debits or standing orders bounce, it’s hard to work out if an annual cost of £60 is less than the default fees you are likely to be charged throughout the year.
This is also the only basic bank account, which are offered to people on low incomes or have trouble managing their finances, that charges those customers a monthly fee.
The Post Office Standard Account
The Standard Account comes with full banking facilities and an overdraft interest rate of 14.9%. To open this account, customers must deposit the account with £100.
This account is a good value account when it comes to authorised overdrafts. The annual cost for a £100 authorised overdraft for one week a quarter is just £1 and the annual cost for a £500 authorised overdraft for two weeks each month is £32.
If the account was available nationally now, it would sit among the top five accounts for people using an overdraft.
Post Office entry could be a force for change, says Which?
Richard Lloyd, executive director at Which?, said: ‘It’s good to see more choice in banking on the high street and the Post Office must now show they can deliver a genuinely consumer-friendly alternative to the dominant big five banks. If they offer widely accessible, competitive products and good customer service, the Post Office could become a force for change in retail banking.
‘People will welcome the commitment to providing straight-forward bank accounts without hidden charges. But while ‘free banking’ has always been a myth, anyone thinking about paying for a packaged account with insurance included should carefully consider whether it does represent good value for money for them.
‘The monthly charge for the new basic bank account might put off people who need this service the most and the Post Office should think again if they find evidence of this.’