Look out for hiked up packaged account fees
June 20, 2008
Consumers are being urged to look out for hikes up fees on packaged current accounts from banks, with a number of banks having recently increased the fees on these accounts in preparation for a possible cap on bank charges following the recent victory for the Office of Fair Trading in the High Court test case into bank charges. Many officials have been speculating as to whether banks will now start charging monthly account fees on all current accounts in order to try and recoup some of the losses, and whilst this is a strong possibility there are some accounts for which banks already charge fees, and these are known as packaged current accounts.
A packaged current account works in the same way as a basic current account, but customers are charged a set monthly fee in order for a range of benefits, such as travel insurance cover, vehicle breakdown cover, extended protection, preferential borrowing rates, discounts on certain products, and more. The fees that are charged on these packaged accounts can vary from one bank to another but average around £12-£15 a month. Consumers have always been urged to ensure that the benefits offered will justify the fee charged – in other words, to make sure that the account makes sense in terms of value for money depending on how many of these benefits the account holder will actually use.
Recently the Royal Bank of Scotland, Lloyds TSB, and NatWest have contacted around seven million customers with these packaged current accounts to advise them that their monthly account fee will be rising. For many, this could mean that the account no longer proves value for money, and it is important for account holders to work out whether purchasing the various benefits that they do use on the market themselves would prove cheaper than getting them for ‘free’ and paying a monthly fee to the bank.
One financial analyst recently stated: ‘The current account market is going through a lot of changes as a result of the OFT court case. If the conclusion is that these charges are too high, the OFT could seek to force banks to reduce them. If that’s the case, banks have to look for other ways of making money.’
The banks have tried to justify the rise in costs, with a Lloyds TSB official stating: ‘Customers told us they would value additional benefits, and to cover the cost of these we have increased the cost of the Gold and Platinum accounts.’ A NatWest spokesperson added: ‘The packaged accounts offer our best-ever potential savings for customers with the addition of new features, and this has been reflected in modest price rises.’
In a recent survey it was revealed that nearly 60% of consumers in the UK do not want to see monthly charges introduced on standard current accounts, even if this means that there is a significant reduction in penalty fees. However, this is something that may happen based on the final outcome of the bank charges High Court case.
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