Are packaged current accounts worth the money?
March 3, 2008
Many UK banks have started to offer packaged current accounts over recent years, and these accounts are the same as current account but they offer a range of extra benefits in exchange for a monthly fee. The fee that is charged for these packaged accounts can vary, but generally ranges between £12 and £25. More and more banks have started offering this sort of account over recent years, with the name of the account differing from one bank to another, such as the Barclay’s Additions Account, or the Lloyds TSB Gold Account.
There are a number of benefits that are offered by banks to customer that have these packaged current accounts. Amongst the benefits that consumers can enjoy are travel insurance cover, breakdown cover, discounts at certain retailers or on certain products and services, mobile phone insurance cover, and more. Banks also claim to offer preferential interest rates on credit balances as well as preferential rates on borrowing to those with these accounts.
However, there are concerns that the interest rates paid on credit balances may not actually be as good as the rates paid on some of the best standard current accounts. Also, if the accountholder does not tend to make use of the benefits package on a regular basis then the monthly charge that is paid for this account is simply wasted money, with some accountholders paying hundreds of pounds a year in order to have this account. According to research from Moneyfacts some of the lowest interest rates on credit balances are paid on packaged current accounts from Barclays, NatWest, Royal Bank of Scotland, Yorkshire Bank and the Co-op.
One industry official stated: ‘The savings you make will more than likely pay the cost of buying some benefits independently. These benefits can be quite attractive but only if you take full advantage of them, so make sure you register for them and make sure they fully meet your needs. How beneficial is car breakdown cover if it only covers you on a limited distance from your home? Alternatively, how often do you lose your mobile phone?’
It is important for consumers to go through the benefits offered before signing up for one of these accounts, and deciding whether they want or need the benefits available. If you are not likely to use the benefits and the difference in interest rates makes little difference compared to having a standard current account then there is little point forking out all of that money each year. Once you have signed up for one of these accounts you can cancel and go back to a standard current account, but the process can be time consuming as some banks will make you write in to request cancellation, which can result in additional monthly charged whilst you wait for your request to be processed.
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