WOULD you buy your baked beans from Barclays? Your knickers from Nat West, your meat from the Midland? No? Well then why do we bank with supermarkets?

The Co-op has done it forever, of course, but a few years ago, other supermarkets burst onto the banking scene and they were a breath of fresh air. In those heady early days of confident stock markets and high interest rates, they offered a simple straightforward approach to banking.

You could, they claimed, sort out your finances along with the weekly shop and, to an extent, you could. What was more, these were the banks for small savers. The big banks and building societies - even the dear old Post Office - weren't interested in people with only a small amount to save.

Even if they didn't demand a minimum deposit, their choicest interest rates were only for those who had invested a decent amount. The supermarkets banks changed all that over night. They offered decent interest on anything from £1 upwards, plus instant easy access. They knocked spots off the opposition and regularly featured in the financial press Best Buys for savings.

Since then, of course the financial world has been in turmoil, with interest rates plummeting. Many building society accounts pay interest below the rate of inflation - so your money is losing value all the time. Time for another look to see if the supermarkets can still do for savings what they have always done for soap powder.

* MARKS & SPENCER (www.marksandspencer.com/financialservices): Not a bank as such, but offers a wide range of financial services including loans, investments, life assurance, stakeholder pensions, car buying and insurance. They also have something called a Personal Reserve, which is a cross between a loan and a credit card agreement, with interest at around 18.9 per cent and loan rates for £5,000 at 11.2 per cent which includes a one per cent discount for chargecard customers.

Verdict: Their products look interesting but there are cheaper ways to borrow money.

* SAFEWAY: Run by Abbey National, which has branches in some Safeway stores. Banking in Safeway seems a bit of a half-hearted venture. The leaflets in stores were out of date and very limited in their scope, and their website was unhelpful and constantly crashing. I persevered and eventually found a nice young man on the end of a phone but it was all a bit of a battle. Under the Safeway banner, they offer a limited number of financial services. Postal Notice Account: £10,000 with 3.9 per cent gross; Less than £10,000, 1.05 per cent, ISA: £3,000 plus 3.9 per cent gross.

Verdict: Too half-hearted to bother about and it's better, if you wish, to deal direct with Abbey National.

* SAINSBURYS (website at www.sainsburysbank.co.uk) : Full range of financial services - savings, loans, insurance, credit card, mortgages, including buy to let. They'll even buy a car for you. Plenty of up-to-date information in stores and a helpful website. Bonuses include Sainsbury's points on Visa card and home insurance purchases. Instant Access Saver: 2.85 per cent on £1; 3.60 per cent on £25,000. Direct Saver: 3.55 per cent on £2,500 (minimum deposit); 4.05 per cent on £100,000. Loan rates - for £5,000, 8.5 per cent.

Verdict: Easy to use, with loan rates competitive and savings rates average.

* TESCO (www.tesco.com/finance): This is the only supermarket to bring banking right to the checkout. You can actually pay into your savings account - or withdraw up to £100 - while you're paying for your shopping. Masses of easy to follow information is readily available and there's a helpful website. The company offers savings, loans, life, home, travel, pet and motor insurance, Visa card and foreign currency, ISAs and mortgage finder. Bonuses include Clubcard points when you use your Visa card and discounts when you buy some insurance online. Instant Access Saver: 2.85 per cent on £1; 3.75 per cent on £15,000; 4 per cent on £50,000. Loan rates for £5,000 for one year: 8.4 per cent, for £5,000 for three years: 8.7 per cent.

Verdict: Very accessible and a lot of effort goes into making it easy. The loan rates are very reasonable but rates on savings are average.

OVERALL: The great banking revolution that the supermarkets promised has not quite materialised. Like many of their special offers, once the first publicity has worn off, the enthusiasm wanes. However, supermarkets have done a great deal to make banking more easily understood and accessible. Sainsbury and Tesco generally offer a quick and efficient service and their loan rates are competitive. Rates on savings are no longer at the top of the table, though still better than some high street banks. However, these accounts are basically run by phone, post or over the Internet and you can get better rates by going to other Internet accounts.

As always, you have to shop around for the best buys.

Published: Friday, March 15, 2002