Since the credit crunch began to bite, some of Britain’s high street banks have been staggering around like stumbling heavyweights awaiting a knockout punch to finally put them out of their misery.
Could that moment arrive when Tesco, Britain’s biggest retailer, which recently announced £3?billion annual profits and a 30 per cent share of the UK grocery market, decides to open bank branches in many stores offering current accounts to six million customers?
Since Tesco paid Royal Bank of Scotland (RBS) around £950 million last year to take full 100 per cent control of Tesco Personal Finance, its determination to use personal finance as a platform to future growth has been plain to see.
Andrew Hagger, current accounts analyst at Moneynet.co.uk, says if Tesco enters the current account market, traditional players will have to be at the top of their game on both rates and customer service.
In 2009, Tesco will take the banking and insurance centre, trialled in its store at Silverburn, Glasgow, to 30 more stores across Britain, selling 28 products and services currently available in general insurance, credit cards, loans and savings.
The first will be in Blackpool, Coventry and Bristol.
The Tesco Internet account is among better-paying instant access accounts - paying 1.5 per cent, plus a one year one per cent bonus.
But the message from Tesco headquarters is that a current account launch is likely “within two years”, with a move into mortgages also probable “in the longer term”.
“If it is to be a real threat to existing suppliers, Tesco must offer an account which can be operated online, and is straightforward on fees and charges,” Mr Hagger says. “People need to know exactly how much they are paying on overdrafts, and for how many days.”
He says the credit crunch means more people are using an overdraft limit to survive from one payday to the next – but many don’t know what it costs.
Moneynet.co.uk research shows the average authorised rate for overdrafts is 14.4 per cent, although some current accounts charge a daily fee rather than an interest rate for “greater transparency”.
The Halifax Reward current account charges £1 per day for authorised overdrafts to £2,500, and £2 per day on £2,500+ (this latter account also pays £5 credit per month, if funded with the required minimum £1,000 per month).
“Choose an account to suit your own spending profile,” Mr Hagger advises.
“If you are regularly in the red, switch to a deal where charges are lower.
“Don’t be swayed by credit interest rates, as you won’t reap the benefit.”