A recent survey of 8,815 Which? members found that 30% of them pay a fee for their current/packaged bank account, with the majority believing they get a good deal. But is it really worth paying a fee for these accounts?
I’ve had a packaged back account for years. Twenty, to be precise. But it’s only in the past year that I’ve really thought about the benefits I get and whether they’re worth paying for.
Paid for accounts
Last December, a colleague wrote a piece about mis-sold package bank accounts and used mine for research. After a bit of digging, she discovered I probably had a very good case against my bank for mis-selling.
Back in 1996, I’d recently graduated from university and still had the debts to show for it. My local bank branch invited me in to discuss my finances and told me I had to clear my overdraft with a loan. Said loan, as it informed me then, was only available if I opened a packaged account. This came with several ‘benefits’, including travel insurance and car breakdown cover, although I didn’t really give them a second thought at the time.
With my colleague’s help, I sent off a letter of complaint and following a few phone calls with the bank, I was refunded £1,400 – the fees I’d paid over the years plus interest at 8% – within a fortnight.
Still paying the price
But that’s not where the story ends. At some point over the years, my account got upgraded. It too came with travel insurance and breakdown cover plus mobile phone insurance, only it was several pounds dearer per month.
When I got my compensation, I swore I’d sit down and work out whether it was really worth shelling out for. Would I be better off switching to a fee-free account and paying for the different insurance separately?
It’s only now that I’m revisiting it. Turns out I pay £204 per year for the account. If I got equivalent level multi-trip worldwide travel insurance, breakdown cover and insurance for my iPhone 5 separately, I’d pay around £50, £120 and £82 per year respectively. That all adds up to £252 per year, meaning – on paper, at least – I’m actually £48 better off if I stick with the package.
Value for money
Only I’m not. In the past 10 years, I’ve rarely stepped foot outside of Europe and definitely can’t afford to go there more than twice a year. That makes multi-trip worldwide travel insurance pretty redundant. Similar level single trip cover would only set me back around a tenner a trip. Then there’s the phone insurance. I’m probably already covered by my home contents.
In fact, the only benefit I’m likely to use in the package is the breakdown cover. And when you think about it like that, I’m paying an extra £84 per year for it.
Guess that’s that settled then…
Do you pay for an account? If so, why? Have you ever worked out if the benefits you get in a packaged deal are right for you?