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How to tell if packaged bank accounts are a waste of money

There are three questions you should answer before signing up to a 'packaged' bank accounts offering extras in return for a monthly fee.

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by Victoria Bischoff on Jun 15, 2010 at 07:00

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How to tell if packaged bank accounts are a waste of money

Millions of consumers may be paying hundreds of pounds a year for a current account with ‘free’ extras and benefits that they never use.

Known as ‘packaged accounts’, this type of bank account provides customers with a handful of benefits, such as travel insurance or breakdown cover, in return for a monthly fee of anything between £5 and £25.

Data from financial research company Defaqto shows the number of packaged current accounts on the market has grown by 94% in the last four years, and now exceeds the number of standard current accounts available.

However, according to consumer champion Which? these accounts are ‘useless’ and usually not worth paying for.

Why has the number of packaged current accounts available increased?

With the spotlight still on banks over the miss-selling of payment protection insurance (PPI) and excessive overdraft charges, banks will be looking for alternative ways of recovering revenue.

Banks are aware that customers are easily tempted by attractive sounding ‘freebies’, without giving any real thought for if they will actually use them.

What’s more, because consumers rarely switch current accounts, once a customer has been hooked into paying for a packaged account, it is likely they will provide a steady stream of income.

It is therefore crucial customers do not fall for clever sales jargon and ask themselves these three questions before purchasing a packaged account.

1. Will you use the benefits?

The key thing for consumers to remember is that a packaged account is only appropriate for someone who genuinely uses every benefit. If you do not utilise the benefits you are simply wasting your money.

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14 comments so far. Why not have your say?

They are ALL a waste of money

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Packaged bank a/c are of course for idiots, but they help keep thet charges on my a/c low, so do not dare touch them.

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I am glad that my long term beliefs are justified.

I am concerned that many people think the travel insurance element will cover them fully - it is very limites usually and even poorer than that sold by travel companies.

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Why do you suggest they are a possible waste of money when you know they are a sure rip off?

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Q: Are packaged bank accounts a waste of money?

A: Yes.

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I have three Golden rules for Banking...give them nothing, ensure they don't take anything, and take every incentive offer going.......long may the mugs help me achieve this!

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Even if the bank gives you an account "upgrade" to one of these for free, you will find yourself being pestered about insurance, offered abysmal savings rates, encouraged into "in-house" investments etc.

NO WAY! Its almost always cheaper to shop around and get the best value from individual companies or mortgage brokers. eg why get tied into HSBC Premier perks when using Hargreaves Landown will save you a fortune.

A recent highlight was when my account was "demoted" by HSBC - not because of any aspects of my financial affairs, but simply because I didn't put enough commission their way! Actually, I believe that that was actually a success - however I will miss the only useful benefit, ie cups of coffee brought to me by my "Relationship Manager" on my visits to the branch for his annual sales pitch.

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We have opted for the A&L Premium 50 because of the worldwide travel insurance! Why? My husband is 78 and we are off round the world in Oct. For a topup of £20.80 through Fortis we are both covered for 60 days. We could not get anything better anywhere. The fee is £10 per month but you get 5% gross on up to a balance of £2500 in the account. Generally though, I am in agreement that most of these socalled perks are a waste of time and expense for the average customer!

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Travel insurance benefit mostly does not cover for over 65s and unless you read the small print carefully. You could really be in trouble if you need to make a claim. It is too easy to just click the "buy" button. Where is the FSA when they peddle these products ? Answer= paying themselves huge salaries and bonuses having having lavish good bye parties all at the public's expense.

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I recently had a largish sum of money transferred by BACS into a Lloyds account. A helpful young lady actually rang me up to ask if I wanted any help in managing the money, No thanks, but nice to know they already had the cleared funds. Surprising though that Lloyds didn't reflect this money online for another 4 days. I wonder who was benefitting from it?

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My breakdown cover with Nat West is only for 10 miles from home . So no use at all . So stayed with RAC . Will review package soon and probably ditch it .

Will be interesting to see what rate i get for Euros when i buy them soon .

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Kathleen, you have actually paid £140.80 for your travel cover - 12 x £10 for the A&L Premium 50 account plus the £20.80 you paid direct to Fortis. Is that really a bargain?

I didn't realise that travel insurance for the over 70s was so punitive!

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You use a bank account for banking. You use an insurance policy to insure things. What justification is there to combine two totally different products? There used to be something called an "endowment", whose general purpose was to combine a mortgage with an investment. Can anyone tell me how that worked out?

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Alasdair Lawrance

Oct 27, 2011 at 13:05

To 'A Frontline-Staff' -

A long time ago, in a galaxy far, far away, you could buy a 'with profits' life insurance policy which was affordable, and would be the same amount as you borrowed for your mortgage. You paid the interest on your loan, and the premium on the policy, and after 25 years, you paid off the capital with the matured policy and kept the profit. Simples, until the sharks and MBA's saw what was happening, and decided to rip us all off by creaming the 'with profits' bit first. It made transferring a mortgage easy, and you just modified the figures as you moved house, and it lasted 25 years regardless. I was an innocent youth and was introduced to an honest and decent accountant when I was in my 20's, and I am incredibly saddened by the difference in what I see between then and now.

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