Metro Bank has burst onto the banking scene with a fanfare, claiming it’ll revolutionise banking by being fair, exciting and convenient – even your dog can enjoy free treats in its ‘stores’. Well actually, that should read ‘store’ – it has one branch at present (in Holborn, London), but plans to open 39 more over the next four years, all open seven days a week. You can also bank by telephone 24/7 with plans for internet access on the horizon.
While free dog biscuits and smiley banking assistants are nice gimmicks, what really matters is how competitive its products are, so let’s take a look.
The selling point is a debit card (Mastercard/Link) that doesn’t charge commission on overseas spending and cash withdrawals. Otherwise there’s no interest when in credit and you’ll be charged 15% EAR when overdrawn (authorised and unauthorised). When in overdraft paid items are charged at £10 and unpaid at £5, both limited to a maximum 6 items per month.
The overdraft interest rate is ok (the average is around 19%), but there are better deals available. Nevertheless, it’s a nice straightforward account that should prove useful if you spend lots of money overseas.
Metro Bank’s credit card is a Mastercard charging 13% APR and has no commission on overseas spending or charges on cash withdrawals. Purchases can be interest free for up to 60 days provided you repay your balance in full each month. There’s no penalty for late or missed payments, you’ll just continue to incur interest on the money.
If you repay your balance in full each month then a cashback card would likely be a better choice. And if you use a credit card to borrow then a 0% or lower interest deal makes more sense. So while this card is fair, it’s not really a best buy for anyone, although it is worthwhile if you’re a heavy overseas spender and pay off your balance each month.
There’s one rate, 10% APR, that applies to all loans regardless on duration and amount (you can borrow between £1,000 - £25,000). You’ll probably need a decent credit rating to get a loan, but there are no arrangement fees or penalties for repaying early, which is a big plus. 10% is unlikely to be most the lowest rate you’ll get, but it’s pretty competitive nevertheless.
The easy access savings account is a big disappointment with a variable interest rate of just 0.5% at the time of writing. There are one and three year fixed rate bonds paying 2.5% and 3% respectively - ok rates but off the pace (by about 0.5% and 1.3% respectively) and you can’t access the money until maturity.
Retail banks make money by borrowing cheaply from savers and lending at higher rates to borrowers, and despite its revolutionary claims Metro Bank is no different. It does however deserve praise for doing away with hidden/penal charges and generally offering its customers a straightforward and fair deal.
The trouble is, while offering a fair deal across the board is commendable, it’s also Metro Bank’s Achilles heel. The reason some banks/building societies can afford to offer market leading rates on savings and borrowing is that they’re making excessive profits from existing customers elsewhere (e.g. paying 0.1% or less on savings accounts and/or charging top whack overdraft and credit card fees).
So if you like to shop around for the best deals and don’t mind using different providers for different products then Metro Bank is not for you.
But if you value simplicity and knowing you’re getting a fair deal with no hidden nasties, then Metro Bank should prove a breath of fresh air. Only hassle is you’ll need to visit London to open an account until more regional branches open up.