Metro Bank opens its doors

Metro Bank enters the fray this morning with its one branch in Holborn, central London, with the promise of seven-day banking, accounts open and cards in hand within 15 minutes of applying, and high-quality customer service.

While few of its rates will trouble the best-buys, Metro's credit and debit cards will be among the best for overseas spending as you won't be charged the typical 3% fee on every transaction. Metro's loans for amounts under £5,000 will be market-leading.

However, the big catch to get its few top products is you must first open a current account in branch and, as of today, Metro only has one branch. More are coming, but only within the M25 which makes it essentially a London-only bank.

Once you have a current account, you can apply by phone or internet for all other products, except mortgages.

Here is what Metro Bank will offer:

Current accounts

Metro's current account is central as it is the route to all other products, other than a savings account which can be applied for separately.

Anyone who gets the account will have the top debit card to use overseas as there is no foreign exchange fee and no cash advance fee abroad. Only Nationwide Building Society comes close as it offers the same service in Europe, but adds a 1% charge in most other countries.

Although to get cheap spending overseas, you don't need a new current account. A number of credit cards exist which do not charge foreign exchange fees (see the Cheap Travel Money guide).

For UK use, for those regularly overdrawn or in credit, Metro is easily beaten by £100 sign-up bonuses or interest-free overdrafts. Below are the features of its current account (see the Best Bank Accounts guide for the top alternatives):

• No in-credit interest

• No monthly fee

• No cash withdrawal fee (UK or overseas)

• No commission on overseas spending

• 15% overdraft interest whether authorised or unauthorised. Bounced payments are charged at £5 a time (maximum of six per month), accepted transactions that take you over-limit are charged at £10 (max six per month)

Metro also sells a basic bank account called the Cash Account. It is the same account but with no overdraft facility.

There is also a fee-charging account, called Metro Bank Plus, that costs £12.50 a month. It gives you worldwide family travel insurance (with winter sports and golf cover), mobile phone insurance for up to two smartphones, basic RAC roadside recovery and a key service where it will hold a spare set of house and car keys that it will get to you within two hours, at any time.

Savings

Its savings range is anything but market-leading as you can earn up to 2.8% variable or 4.9% fixed elsewhere, though it is the only Metro Bank product you don't need a current account to run alongside (see the Top Savings guide for the top rates).

There are four current Metro options:

• Easy access savings. This pays a variable 0.5%.

• Young savers' account. This pays a variable 1%.

• One-year fixed rate savings. This pays 2.5% with no access to your cash for the term.

• Three-year fixed rate savings. This pays 3% with no access to your cash for the term.

• Cash Isa. This will launch in October (see the Top Cash ISAs guide).

Credit cards

There is one card, which charges no overseas spending commission and no cash advance fee, making it the second best for spending abroad behind the Halifax Clarity card (see the Cheap Travel Money guide).

But for use at home, as a spending or balance transfer card, it is easily beaten by 0% deals. The card's features include:

• No commission on overseas spending

• No cash withdrawal fee

• No monthly fee

• No balance transfer fee

• 13% APR on all spending, cash withdrawals and balance transfers

Loans

Metro offers one loan rate of 10% on all amounts (minimum £1,000), though you will need a good credit score to get it.

The bank will not operate 'risk-based' pricing whereby those with a slightly inferior credit score may get a loan but at a higher-than-advertised rate.

The rate is beatable on loans at £5,000 or above as you can pay 7.7% but is a comfortable winner on sub-£5,000 loans as the best alternative rate is 11.9% (see the Cheap Loans guide).

Mortgages

It offers three mortgages, though the rate depends on the percentage of the property value you are borrowing, known as the loan-to-value (LTV). The fee on all mortgages is £500.

At up to 60% LTV you'll pay:

• 3.5% for a two-year variable (as a discount of 0.5 of a percentage point from Metro's standard variable rate)

• 4% for a two-year fix

• 4.5% for a three-year fix

If borrowing up to 80% LTV (the maximum allowed), add one percentage point to those rates.

You can only apply in branch for a Metro Bank mortgage (see The Remortgage Guide and First-time Mortgage Guide).

When will Metro open more branches?

It plans to launch three more branches within the M25 this year: in Earl's Court and Fulham in September, and in Borehamwood in October.

It will open another eight in London next year and 200 within the M25 over the next decade.

How Metro Bank says it will be different

It claims it "will transform the face of banking" through better customers service, while it will also add extra features that some may class as gimmicks, others as helpful:

• It claims to be able to open a bank account, credit card or loan within fifteen minutes (per product), while you will also be able to walk away with a card and pin in that time, if applicable.

• It will open from 8am-8pm, seven days a week, unlike most banks that only open during business hours. It will also have extra staff during the lunchtime rush.

• It will offer a coin-changing facility for anyone (not just customers).

• In-store toilets, free pens, lolly pops and dog biscuits will be available to anyone who comes in, not just customers.

When MoneySavingExpert.com was given a sneak preview of the Holborn store, it looked more like a hotel lobby than a traditional bank with high ceilings, a hotel reception-like counter and marble floors.

But the true test of its customer service promises will come in the next few weeks.

Our view

Martin Lewis, MoneySavingExpert.com creator, says: "There's been a genius amount of publicity generated by Metro Bank, I'm surprised Max Clifford isn't involved. 

"Beyond the hype, there is one branch in one city. It's not the first bank in 100 years as is often stated as there have been scores of new banks. It is the first UK-branded bank that offers a current account and has a branch in over 100 years.

"For some in London who focus on service, and like an old fashioned bank, it will appeal. I hope it pushes the industry to fewer hidden charges. 

"Yet its product range won't trouble most best buy tables, which means the crowds won't be there to give customer service teething troubles.

"The big problem is to get any of its products you need its current account, which has poor rates. Its products are only decent for spending abroad and for loans under £5,000. At best, it's worth a raised eyebrow rather than copious pages of newsprint."

What other new banks will launch soon?

Both Tesco and Virgin have previously stated their intention to open fully-fledged bank branches, offering the standard range of banking and lending products.

But it is unclear when the pair will launch their branch networks.

Further reading/key links

Top accounts: Best Bank Accounts Reclaim cash: Bank Charges