14:01 15 April 2013
Already in the savings accounts, mortgages and credit card markets, the Post Office is now poised to become one of the biggest providers of financial services on the high street.
But the Post Office isn't the only provider looking to upset the big four banks (Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays), as there are already some great current account deals to be had elsewhere. Here's a look at the Post Office's plans and how they stack up against what the rest of the market has to offer.
'Value for money'
The Post Office's entrance into the current account market shouldn't be taken lightly - it has more than 11,500 branches in the UK. By comparison, Barclays has only around 1,700 branches.
Initially, its current accounts will launch in a small number of Post Office branches, before a wider rollout gets underway in 2014.
Nick Kennett, director of financial services at the Post Office, said: "We've carried out extensive research into the current account market and the findings tell us that customers want simplicity, transparency and good value for money."
The Post Office already has nearly three million customers and a savings book totalling £17billion. It's expected that the expansion into current accounts will be good news for consumers as it will create greater competition among its rivals.
Kevin Mountford, head of banking at MoneySupermarket, said: "While we don't yet know the specific product details, the Post Office launching into the current account market will help create more competition.
"We have already seen new challengers enter the market, with the likes of M&S Money launching a current account last year, but until now most of these challenger accounts have been aimed at specific audiences. The Post Office current account should have mass market appeal due to its large customer base and ease of access, so I expect this account will be very popular."
Who is the Post Office up against?
Look beyond the 'big four' banks and you will find some great deals to be found in the current account market.
Here is a quick look at the kinds of accounts that the Post Office will be competing against.
If you switch to the First Direct 1st Account via MoneySupermarket, you can currently get £125 cashback, providing you pay in £1,000 a month and transfer over two direct debits or standing orders to the account.
The account comes with a £500 overdraft, the first £250 of which is interest-free. If you go overdrawn beyond the £250 mark, you'll be charged an annual rate of 15.9%.
After the first six months, you will have to pay a monthly fee of £10 unless you continue to pay in £1,000 a month or have another account with the bank such as a savings account or mortgage.
In-credit balances won't earn any interest, but signing up for the 1st Account will mean you're eligible for the bank's Regular Saver Account, which pays 6.00% as long as you pay in between £25 and £300 per month.
What's more, First Direct (part of HSBC) is renowned for its excellent customer service and it will give you another £100 to close your account if you're not happy. Read more about the account in Rachel Wait's article 'Focus on: EXCLUSIVE! Grab £125 for switching to First Direct'.
For those looking to get something back on credit balances, Nationwide's FlexDirect current account now offers5.00% AER fixed for 12 months on balances up to £2,500. This means a basic rate taxpayer maintaining the maximum balance would earn £100 in interest over the course of the year.
You have to pay in at least £1,000 each month in order to earn the 5.00% and once the 12 months are up, the rate falls to 1.00%. The account also has a fee-free overdraft for 12 months, after which you'll pay 50p per day if you're £10 or more overdrawn. Rachel Wait reviews the FlexDirect account in more detail here.
If you have a bigger balance that this, then Santander's 123 Current Account offers up to 3.00% interest on credit balances, and also offers cashback on certain direct debits on the account.
Credit balances of between £1,000 and £1,999 will earn an annual equivalent rate (AER) of 1.00%, while balances of between £2,000 and £2,999 will earn 2.00% AER, and balances of between £3,000 and £20,000 earn 3.00% AER.
What's more, the Spanish bank pays 1.00% cashback on Santander mortgage payments, water and council tax bills, 2.00% cashback on energy bills and 3.00% on mobile, landline, TV package and broadband bills.
But there are a couple of catches to look out for, such as the fact you have to pay a monthly fee of £2 and fund the account with at least £500 a month (£1,000 if you want to earn any interest). You can read Laura Howard's review of the account here.
Making the switch
Switching your current account is a lot less hassle than it might seem, because the majority of the work is done for you by your existing provider and the new one. Essentially, all you will need to do is fill out some forms.
Most banks will even set up a fee-free overdraft facility, so that you won't be left out of pocket if you miss any direct debit payments during the switching period, which usually takes between four and six weeks.
As of September, the switching process is being simplified so that you'll be able to switch within seven days, as I explain here - but don't pass up on a good deal now by waiting until then. Head over to our current accounts channel to see what's on offer.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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