Post Office reveals the three current accounts available in 11,500 branches next year – but are they any good?

By Lee Boyce

PUBLISHED: 05:54 EST, 13 May 2013 | UPDATED: 07:21 EST, 13 May 2013

The Post Office has announced details of three current accounts which will be piloted in 29 branches in East Anglia from today before a full launch across its network next year.

Two of the three accounts carry a monthly fee, while the other is a ‘free’ standard account. All will be offered in partnership with Bank of Ireland UK.

The three accounts on offer are named Standard, Packaged and Control. It says each has been designed to ‘appeal to different customer needs.’

Current accounts: Those in East Anglia can open a Post Office bank account from today - with plans to roll it out across the branch network by next year

Its decision to launch current accounts comes ahead of new seven day switching rules which come into force in September with the aim to make it easier and quicker for customers to move bank accounts.

The accounts can be opened in branches in the trial area, or else customers can register their interest ready for the full launch next year. You can see at list of the trial branches here.

The Standard Account is the Post Office’s ‘free in credit,’ everyday banking offering. Accounts can be set-up with an opening deposit of £100, and customers can apply for an overdraft facility when opening, or anytime afterwards.

The overdraft interest rate is currently 14.9 per cent, which is competitive, and there are no unarranged borrowing charges.

Its Packaged Account has a monthly fee of £8 and comes with European multi-trip family travel insurance and vehicle breakdown cover. It also has identity theft protection services and comes with the same overdraft interest rate as the Standard Account.

 

5 FAVOURITE CURRENT ACCOUNTS

	Bank	Incentive
1	First Direct	£100 to switch
2	Nationwide	Free travel cover
3	Santander	3% cashback
4	Barclays	Choose add-ons
5	Halifax	Earn £5 a month

Finally, the Control Account comes with a fixed monthly fee of £5. This account is designed, it says, as a basic account to help customers keep in control of their finances and is targeted at those who are new to banking, potentially on lower incomes or who have had difficulty with default bank charges in the past.

Although this account carries the monthly fee, there are no further charges for returned unpaid items such as direct debits or standing orders.

Consumer group Which? has warned some customers may be reluctant to open the Control Account if they had to pay a monthly fee for.

Richard Lloyd, the executive director of Which?, said: ‘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.’

But the Post Office argues that basic account customers could save up to £215 a year by being able to pay their energy bills via direct debit. Other basic bank accounts are free but charge hefty fees if direct debit payments are missed. Read our guide here.

All three of the Post Office accounts will offer access to online banking.

Nick Kennett, director of financial services as the Post Office, said: ‘Consumers tell us they feel penalised by complex and expensive bank charges and fees. 

‘When they go overdrawn they often don’t realise how much it will cost and this can have a real impact on their finances. With the Post Office what you see is what you get – no surprises, just a fair and transparent way to manage your money.’

Kevin Mountford, head of banking at MoneySupermarket, said: ‘As you would expect from a trusted brand such as the Post Office, these accounts offer simplicity and transparency, and with a large branch network, we could see it become a serious challenger in the current account market by the time of the national roll out to all 11,500 branches in 2014.

‘However, it is important that anyone looking to open an account, consider the benefits on offer and look at alternatives as these accounts aren’t among the market leading offers currently available, and don’t offer some of the incentives available on other accounts such as credit interest and interest free overdraft facilities.’

Bank of Ireland: The Post Office is partnering with the bank to offer current accounts

Branch network that dwarf that of other British banks

The Post Office is bringing current account banking back to its branches for the first time since it sold Girobank more than two decades ago.

Almost three million customers already hold a Post Office financial services product. It offers mortgages, savings, credit cards and insurance, as well as currency exchange.

Its push into financial services in recent years has already delivered big results. Its savings book currently sits at £17billion, while it has 2,100 cash points and is a major player when it comes to travel cash.

Crucially, it has a network of over 11,500 post offices branches – more than the combined total of branches held by British banks.

Even after recent closures, many rural areas still have a Post Office. It serves 20million customers a week while 99.7 per cent of the total population live within three miles of one.

This could make the Post Office current account appealing in villages and small towns which have seen bank branches close down in recent years. It may also make posting a letter even trickier – although 6,000 branches are currently undergoing a £1.34bn modernisation programme.

Familiar sight: Queues are a common factor at Post Office's - would a surge of current account customers mean more queues?

Will bank accounts save Post Office branches?

A survey carried out by the National Federation of Subpostmasters (NFSP) found a large number of believe their own branch to face a serious threat of closure.

Their 'extremely uncertain future' was due to falling incomes and a lack of new work, after a plan to turn Post Offices into a 'front office' for government services, announced in 2010, had failed to materialise.

Just 17 per cent of subpostmasters said they could see a strong future for their business, while 51 per cent said they had seen their Post Office income decrease in the past year.

The research found Post Office overheads increased for 70 per cent of subpostmasters while staff costs rose for 48 per cent of those who responded.

The NFSP said the survey revealed few new services had been introduced since 2010, and most of the financial and government services were yielding little or no income for the vast majority of subpostmasters.

It said less than 10 per cent of subpostmasters receive any income from many of the key Post Office financial services, such as credit cards, insurance for homes, cars and vans, and life assurance, while 70 per cent reported an increase in overheads and 48 per cent reported an increase in staff costs.

It remains to be seen if they would see any benefits from having a current account offering in its range.

Can the Post Office become a viable 'challenger' to the big banks?

Comment by This is Money banking correspondent Lee Boyce

The Post Office already has the branch network to appeal to those to whom a local branch is important. Almost everyone lives or works within a reasonable distance of a Post Office branch and it says it is committed to not close anymore branches.

Additionally, many customers are disillusioned with big banks and are looking for new alternatives after a spate of scandals.

A big question however is: can its branches cope? I know it has a large number of them, but often, especially around lunchtime, queues can be dozens deep as the counters deal with parcels or and currency exchange.

Would it be biting off more than it can chew with a current account, and would customers be lining up in the same queues to do their banking?

It will soon become clearer after the East Anglia trial – and it’s good to see it is taking things slowly rather than jumping in straight at the deep end.

Another potential snag which may deter customers is the fact it is partnering with Bank of Ireland UK. Although it has partnered with the Post Office for its financial products for a decade, many may be put off by recent hikes that were made to rates on tracker mortgages, despite the bank rate remaining unchanged .

Writing this weekend, Jeff Prestridge, personal finance editor for This is Money sister title Financial Mail on Sunday, said: ‘The Post Office is doing itself no favours by continuing its business relationship with the tarnished Bank of Ireland, the provider of its branded mortgages and supplier of  its soon-to-be launched current account.

‘Last week, 13,500 Bank of Ireland home loan borrowers saw the rate on their base rate tracker mortgage jump, some by more than 100 per cent from 2.25 per cent to 4.99 per cent.

‘This was not because the base rate (0.5 per cent) had risen, but because the bailed-out bank needs to build up more capital reserves.

‘It was a despicable act – made possible by it triggering some clause buried away in the mortgage contracts of these borrowers. If I was a Post Office boss, I would be looking for a more reputable business partner.’

The current accounts the Post Office is offering do give customers a decent range of banking.

One thing is for sure – it has a solid customer base already for its financial products. Three million hold a financial product with them already – if it managed to get just 10 per cent of these to switch bank, you’re talking 300,000 customers.

It’s interesting to see how popular these current accounts will be.