Nationwide Versus The Rest

Nationwide offers a wide range of financial products and has a loyal following. We compare it to all the other providers to see if that loyalty is justified.

It seems that many Fools are hooked on Nationwide Building Society. I disapprove of this attachment, because it seems to go beyond a detached analysis of its products and on to an emotional link.

True, Nationwide is a mutual organisation; it's not a public company owned by shareholders. But what counts in the end is the quality of the financial product. Regardless of its corporate structure, does Nationwide offer the best deal for you?

I want to show you how some of Nationwide's products compare with the best in the market, to see if there's a sound basis for this strong attachment.

Credit cards

Like all charity credit cards, Nationwide's Comic Relief card is gimmicky and an inefficient way to donate to charity, as I explained in point five of this article.

Nationwide's Classic and Gold Cards are 0% balance-transfer credit cards. Here's how they compare to the rest of the market:

Top five balance-transfer credit cards, plus Nationwide's Classic and Gold Cards

Ranked in 19th place, clearly Nationwide's two balance-transfer cards aren't top of the market.

However, all of Nationwide's credit cards have uniquely excellent terms, which is what makes them a favourite with Fools. Firstly, it has a positive payment hierarchy, which means when you have different types of debt on it, e.g. both a balance transfer and a purchase, the most expensive debt is paid off first. Every other credit card has a costly negative payment hierarchy. Read more about it here.

Another great contract term is that you can make commission-free purchases abroad using wholesale exchange rates. Although most other credit cards also use wholesale exchange rates, almost all of them charge 2.75% commission on top.

Current accounts

Nationwide current-account customers also tend to be loyal, but is this because it's table-topping?

Top five current accounts, plus Nationwide

It comes a creditable joint fifth on the interest rate, and only loses position because the rate of 4.25% AER is paid on just the first £3,000 in the account. Even so, the interest-rate is considerably lower than the top three accounts but, on the plus side, Nationwide has maintained a good rate for some time, which is unusual.

Finally, Nationwide doesn't charge you to use your debit card abroad, which is another rarity, and is a huge selling point to many travelling Fools.

Savings

Let's jump straight into the comparison table:

Top five easy-access savings accounts, plus Nationwide

This is a table of the easy-accesss accounts with no unpleasant catches (like penalties for withdrawing money or short introductory bonuses). Putting Nationwide in this table is a bit of a fiddle though. Nationwide would not normally make it onto this table because it has a catch, which is that you must have Nationwide's current account to get its e-Savings account.

However, one of the reasons Nationwide customers like its current account is because you can instantly transfer funds from your current account into your Nationwide e-saver account and back again. This is not the only account where this is possible, but combined with its good rates and, from what I gather anecdotally, its good customer service, many Fools like it.

Again, Nationwide has consistently offered a good interest rate, but some providers with significantly better rates actually have guarantees. Icesave, for example, has an excellent interest rate of 6.2% AER and an unbeatable guarantee to keep its rate at least 0.25% above the Bank of England base rate until October 2009, and thereafter not lower than the base rate till October 2011.

Nationwide has many other types of savings accounts, but mostly these are not typically Foolish. For most of them, it's because you're tied in for a year or two.

Insurance

Nationwide offers car, home, travel and life insurance. As insurance varies so much depending on your profile and the cover you want, it's impossible to compare insurers in a simple table. It really makes sense for you to compare many providers whenever you buy such insurance.

In addition to the above, Nationwide offers:

• Mortgage life insurance, which is suitable if you have dependants
• Critical illness cover, which we at The Fool are more dubious about
• Income protection, another Foolish insurance, and
• Mortgage protection insurance. Sadly, Nationwide's is vastly over-priced.

Investments

Nationwide has an investment product called a guaranteed equity bond (GEB), which I shan't bother comparing, because these are dreadfully unFoolish, as I explained in The Worst Ten Financial Products.

The building society has some other investment products though, the most important being its equity (shares) ISAs. Through its equity ISAs, you can choose from five investment funds. The Foolish one is the FTSE All-Share tracker fund. (Read about trackers.) This has annual management charges of 1% per year, plus expense charges.

This is not bad, but compare this with the best out there: Fidelity's MoneyBuilder UK Index Tracker and Legal & General's UK Index Tracker. Fidelity charges 0.3% after annual management charges and charges for expenses combined. L&G charges 0.52%.

Loans

Let's get straight to the tables. As rates vary depending on the size of the loan, you get two (£5,000 and £7,500):

Top five unsecured loans, plus Nationwide based on a £5,000 advance paid off over three years

(excluding payment protection insurance, or PPI, because it's much cheaper to buy insurance separately)

Top five unsecured loans, plus Nationwide based on a £7,500 advance paid off over three years

(excluding PPI)

I included the APR for your amusement but, because lenders can manipulate it, you should compare loans using the monthly and total repayments instead.

Nationwide's is a Foolish loan, because it is unsecured and has a fixed interest rate (like all the above). Also, having read through the small print, it appears that Nationwide doesn't hide nasty boxes in its application that, if completed incorrectly, mean it'll pass your details on to some dubious secured-loans company.

However, at 26th and 30th places in the above tables, it's quite a bit off the top.

Mortgages

I spoke with James Cotton at London & Country, which runs the no-fee advice part of our award-winning mortgage service. He told me that Nationwide is 'fairly no-frills' and that it has a 'mainly straight-forward range' of mortgage products.

That may sound dull, but we find time and again that simple, straight-forward products are the best value for money. Furthermore, Cotton said that its range has no hidden surprises, such as higher lending charges, although it does now charge a £90 exit fee.

Nationwide always says that it treats new and existing mortgage customers equally; most financial companies penalise existing customers with poorer rates. However, the building society was criticised recently, because it appeared to go back on its word. I think the criticism was unfair, as I wrote here. Cotton also believes that it more or less treats its new and existing customers equally.

As for its rates, Cotton says it's usually at the top or thereabouts when it comes to tracker and fixed-rate mortgages. Just like insurance though, it's vital that you compare mortgages properly, as there are over 8,500 to choose from! The best one for you will depend on your profile, and the type and size of the loan you require.

Travel

Finally, Nationwide offers travel money through its website. This service is powered by Travelex. However, I found that you get a better deal if you go direct to Travelex online (but not with Travelex bureaux at airports).

Conclusion

With the possible exception of mortgages, Nationwide's products are not on the best-buy tables. However, it tends to offer good rates, if not excellent ones, along with some unusually fair contract terms.

It seems to be that combination of consistently good interest rates and unusually fair contract terms that makes some Fools get emotional about this big financial-services provider.

I can understand why some Nationwide customers, especially those with little time, choose to sit tight. However, looking at all the above tables, I see that the savings add up if you shop around. If you want consistency, you could look for the products that come with firm guarantees for the future.