M&S Bank closes current accounts: best alternatives

Bank blames growth of digital banking for decision to ditch current accounts.

M&S Bank has announced that it is to close its range of current accounts this year.

The provider explained that the way we bank is changing, and it has noted many customers switching to online banking. As a result, it said it would be closing its current accounts later this year, and with them the in-store bank branches customers could make use of.

In a statement it added: “We understand this is likely to come as a disappointment to you and we want to apologise for any inconvenience it will cause."

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What happens now?

The accounts aren’t closing immediately.

M&S Bank said it will get in touch with account holders in May with more information about what they need to do in terms of handling the closing of their account.

At this point account holders will have one of two options ‒ switching their account, and the various direct debits they may have, to another provider, or simply closing the account. 

This can only happen once the balance is zero, so account holders will either need to withdraw the money in there, or pay off any existing overdraft.

If you don’t do anything in terms of closing or transferring your account by August, then it will be frozen.

As well as the current accounts, M&S Bank will also be scrapping its regular saver account. However, it will still pay interest as if it had been open for the full 12-month term.

It’s important to remember that this move doesn’t actually mean M&S Bank itself is closing. Indeed, the firm emphasised it will continue to offer a range of credit and loan products, insurance deals and savings products.

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Who should I switch to?

One of the big selling points of the various M&S bank accounts has been the ability to build up loyalty points, which could then be used to cut the cost of your shopping in Marks & Spencer.

While there won’t be any accounts still in operation that directly help you save cash in M&S, there are other accounts that offer you a reward when you spend money.

NatWest and Royal Bank of Scotland, for example, offer a Reward programme which hands account holders £5 a month so long as they have two direct debits and log into their mobile banking once a month.

Further cashback can be earned when you spend at certain partner retailers.

Similarly, the Santander 123 account pays 1%, 2% or 3% cashback on a range of direct debits, while the Lloyds Bank Everyday Offers scheme offers up to 15% cashback when you shop at certain retailers.

For more, check out our comprehensive guide to the best bank accounts that pay cashback.

Importantly all of these options come from traditional banks, so you can enjoy those rewards while still having the option of banking in person through branches.

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Going digital

M&S Bank pointed to the growth of online banking as one of the reasons for dropping its accounts, and it’s true that some online-only banks are winning favour with Brits.

According to the most recent data from the Current Account Switch Service, two of the banks that have seen the biggest influx of new customers in recent months have been Monzo Bank and Starling Bank, both of which are app-based banks that don’t have their own branches.

These banks have won plenty of support for a host of reasons and not just the quality of the apps themselves. 

Not only have they been great for those who want to be able to use their account overseas without being whacked with additional charges, but they are also excellent in helping with money management.

Both Starling and Monzo for example can help you save without even realising it, thanks to a feature that rounds up your spending to the nearest £1, with the change going into a savings pot.