Are packaged accounts a stitch-up?
In theory, fee-charging current accounts should represent good value to some customers. But are they still good value if you’re not eligible to use some of the account’s benefits?
Many banks sell packaged current accounts that come with a number of assorted benefits, such as travel insurance, mobile phone cover and car breakdown protection.
However, the Financial Services Authority is taking action to make sure customers are getting good value from these fee-charging accounts. After all, if you can’t access the benefits, there’s no point in paying for them.
The problem with packaged accounts
Let’s take travel insurance for instance – it’s not always right to trumpet this as a major benefit of a packaged account. For example, you could have an HSBC Advance account costing £155.40 a year, but you can only claim on the travel insurance policy element if you’re under 70 years old. It would be easy for an account holder to miss this exclusion and carry on under the impression that they’re covered.
I mention travel insurance specifically because, when we last surveyed Which? members about packaged accounts, more than 80% of respondents told us it was the most recognisable benefit. However, only half of them had actually taken advantage of it.
There’s a similar problem with ID theft insurance – a product we believe is useless considering you have adequate protection under consumer legislation. Some banks have removed this from their packaged accounts, but haven’t actually reduced the cost of these accounts as a result. As far as I’m concerned, that just about sums up the true value of ID theft insurance.
Checking before selling
The goods news is that, as of 31 March, current account providers will have to check whether customers are eligible to claim under each policy that’s bundled with the account before selling it. Sales staff will have to highlight features that won’t be suitable, and annual statements must show claims requirements.
It’ll be interesting to see if all UK banks respond in a positive way and make sure that packaged accounts aren’t mis-sold in future. It still remains to be seen if they were mis-sold in the past. Do you have a fee-charging current account? Do you know if you’re eligible to use all the benefits that come with it?
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