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Are packaged accounts ever worth the money?

Pile of packages

Do you pay for your current account? If so, your bank’s probably convinced you it’s great value with endless ‘must-have’ benefits. Still, if you’re not using them, it’s likely you’re pouring money down the drain…

New research by financial research company Defaqto has revealed that fee-charging current accounts – known as packaged accounts – are on the rise.

There are now 69 on the market – more than double the amount there were five years ago and even more than the number of standard current accounts.

The Financial Services Authority (FSA) estimates that one in five of us now has one of these accounts. So, even in these belt-tightening times, it seems people are keener than ever to pay monthly fees for bank accounts with all the trimmings – usually extras like car breakdown cover and mobile phone insurance.

The problem is, not all of these people are using the extras. Worse still, you can often get the extras cheaper by purchasing them individually.

In August, I explored packaged accounts and found that 30% of Which? members with one as their main account had never used any of the benefits offered. As some packaged accounts now cost more than £300 a year, that’s a lot of money being wasted. In fact, we calculated that it could amount to between £240m and £320m in bank fees each year.

Packaged accounts – for and against

Which? Conversation recently took to Twitter to gauge public opinion on packaged accounts after Martin Lewis spoke about them on Watchdog. There was quite a response, with over 70 tweets back. While some people defended the benefits of the accounts, many thought they were a waste of money.

@referee3103 told us they had a Smile packaged account, and they used the travel and mobile insurance, among other extras. But @M3kx tweeted us to say that her mum had a packaged account and had never used any of the benefits.

@Fridaygirl5 told us that while she doesn’t drive or go on holiday, she feels that her account is worth it for the mobile phone insurance. The reality is, it’s more than likely she could get the cover cheaper elsewhere if that’s all she’s using it for.

FSA to investigate packaged accounts

The FSA has called for increased customer protection when it comes to packaged accounts. It wants banks and building societies selling insurance as part of an account to check the customer is eligible to claim under each policy before they take out the account.

It also wants sales advisers to make sure the policies they sell are suitable for the customers in question, alerting them if some are not. It’s a good start, but more can be done. Which? executive director Richard Lloyd says:

‘People should only have a packaged account if they’re absolutely certain that it will be cheaper for them and they’ll use all of the separate benefits offered. Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare.’

In the meantime, it pays to compare the value of packaged account benefits yourself before signing up. While they can be worth it in some cases, if you have an account and aren’t making use of at least two of the benefits it offers, it’s highly likely you’re not getting value for money.

Mikhail says:
28 October 2011

I closed my Lloyds’ premier account a couple weeks ago, not because of the article, because I realise I could get the a better value for money elsewhere and for the entire household, e.g., the mobile phone insurance on average cost £6-7 p.m. but I also have a laptop, another phone and SLR camera, Lloyds quoted some ridiculers increase in premiums, so I went to American Express My Essentials which now covers all my household gadgets, mobile phones, personal possession and cards worldwide for £13 p.m. The same with the travel insurance and ID protection insurance, I know it is unlikely I will use it, but for a £8 p.m. all my family can access their credit profile from Experian plus some other benefits.

Kabbie says:
28 October 2011

I pay £13 per month for my Natwest Gold Account which gives me Holiday Insurance, Mobile Phone Cover, Breakdown Cover etc,, I’ve certainly got my moneys worth by using all of these facilities more often than not and saved me looking around for all the different services!

Gerard Phelan says:
28 October 2011

A friend has an RBS Rewards account. One of the benefits is 25% discount on theatre tickets which they book for you. She regularly organises theatre trips for her friends (including me). RBS allow you to buy up to 6 tickets at the discount rate for each production/date and they can obtain tickets for most professional shows, so she rapidly gets back the “cost” of the Rewards account.

I know you can get discount theatre tickets using other routes, but this one works for the top productions that are sell-outs and never need to discount.

Kevin Gillibrand says:
28 October 2011

I pay £12 per month with First Directory, I definitely use the annual travel insurance but if I am honest, that is the only part that I am using on a regular basis…

Mikhail says:
30 October 2011

You also benefit from free cash withdrawals abroad with First Directory, as you mentioned travel, and mobile phone insurance if you have one. Although, in many cases, your mobile phone is covered by house content insurance, however, if you claim under that policy your premiums will go up considerably.

I pay nothing on my current account with First Direct – but this was not the reason for joining 20 years ago (there was a charge then) but because the overall service was so much better than Midland Bank. I still think being able to access my account online at anytime brilliant – The human tellers on the phone are equally good. Apart from savings accounts I have never used.any other service.

We pay £156 a year and get annual worldwide travel insurance and RAC breakdown cover.

I don’t think I could buy the same amount of cover for £156 a year. In addition, we have the use of airport lounges which we use twice a year saving about £40.

So we are very pleased with the account; if nothing else is saves us having to haggle every year with the AA to get a better price.

amy says:
5 April 2012

I have a Halifax ultimate reward account which is £10 pm, I only changed to it because Halifax started charging a pound a day to use my authorised overdraft which I do for more than ten days a month so I know I’m in pocket. I know that I have my mobile covered and it’s good to know that I have the travel insurance and the homecare and card cover if I need it. No complaints so far anyway.