Are packaged bank accounts worth the cost?
Packaged bank accounts charge a monthly fee for a number of added ‘extras’, but many find that these extras are not worth the monthly cost. Here’s a useful guide to these accounts to help you decide whether packaged accounts are right for you.
Many banks offer customers current accounts that carry a monthly fee, called packaged accounts. These accounts offer a wide range of added benefits. We take a more in-depth look at packaged accounts and ask are they really worth the cost?
What are packaged bank accounts?
Packaged bank accounts are those that offer customers a range of benefits and extras, such as travel insurance, phone insurance and even breakdown cover, for a set monthly fee. Some of these accounts can offer good value to those who need the benefits they offer, but you need to make sure you couldn’t just get the benefits cheaper elsewhere.
It’s important to read the small print and ensure that you are getting the best deal for your monthly fee.
With packaged accounts, it really does pay to do your own research and find out which accounts offer the best added extras for your individual circumstances. For example, if you drive, travel a lot, have an expensive phone that you want to insure or need a low-cost overdraft, then you might find that you can save hundreds by getting all these benefits through a packaged bank account. Other people, however, may find that they have no need for many of these extras and would not benefit at all from a packaged account.
What extras are included in packaged bank accounts?
This list varies depending on the provider, but here are some of the typical ‘extras’ you pay for with packaged accounts:
- Travel insurance
- Phone insurance
- Breakdown cover
- Free overseas withdrawals
- Favourable interest rates on balances
- Low-cost overdrafts
- Cashback and cash rewards
- Leisure discounts
The extent of these extras varies between accounts. For example, some offer worldwide travel insurance for your entire family, others only for Europe, or they don’t include children. Some offer breakdown cover for the UK and Europe, others just the UK. It’s important to read the small print and ensure that you are getting the best deal for your monthly fee.
What should I check before taking out a packaged account?
Researching packaged accounts isn’t for the faint-hearted. You’ll need to weigh up the costs against the benefits, and many of these benefits aren’t always that easy to measure.
- Would I take out these additional products if I didn’t have this account?
- How much would these insurance products cost me?
- Do I need to insure my whole family?
- Is the cost of these extras more expensive than the cost of the account?
- Will my existing insurer offer me a better deal?
- Do I need the overdraft?
- Do I need a good interest rate on my current account?
- Will I use the breakdown cover?
Other things to be careful about when taking out a packaged account:
- Make sure there is no requirement for you to activate the benefits to use them. You may need to fill in forms to register your smartphone in order to be able to make a claim on the insurance, for example.
- It’s wise to check that your current insurance policy, such as your home insurance, doesn’t already cover items such as your phone for theft, loss or breakage. If you’re already covered, there’s no benefit to you.
- Check whether you will still need to pay out an excess on the insurance policies as these can add up significantly and make the insurance policies less appealing.
- Switching accounts can sometimes make more sense. For example, packaged account A may seem to carry better value benefits than packaged account B, but packaged account B offers a cash bonus for those who switch. This alone could be worth more than the savings made by opting for packaged account A.
- It’s important to check that the insurance policies cover you for everything you require. Don’t just jet off on a skiing holiday with your family assuming you are all covered because you have a fee-charging bank account.
- If you’re older, check what age the travel insurance covers you up to.
What are the advantages of taking out a packaged account?
Although it is wise to show some caution, there are some clear benefits to taking out packaged accounts, aside from potential savings.
- They enable you to relax in the knowledge that you are insured for common requirements without you having to lift a finger.
- The insurance offered may not seem necessary at first, but then you may find yourself making a claim and saving hundreds.
I think I’ve been mis-sold a packaged account, what should I do?
Many people were mis-sold packaged accounts in a number of ways. It is now possible to claim back the fees you have paid out over the years if you fall into one of these criteria:
- Were you sold a packaged account by a pushy salesperson? Were you told it was a privilege to be offered one and did you feel there was no choice?
- Did you find that the insurance products included in the packaged account did not cover you because you are ill or too old, for example?
- Were you led to believe that you needed to get a packaged account in order to take out a mortgage or to open a joint account, for example?
If your bank doesn’t agree to pay you compensation based on a complaint that you were mis-sold, you can take it further by complaining to the Financial Ombudsman.
In conclusion, many people will find that, if they take the time to shop around and do their sums, they will be able to find the added ‘extras’ in packaged accounts can be found cheaper elsewhere. However, certain people, using certain packaged accounts, can save a decent amount of money on the cost of things like travel insurance and breakdown cover.
So, if you use the benefits offered, a packaged account might be right for you, but if the added extras are no use to you, packaged accounts are probably best avoided.
Caroline Ramsey is a content creator who specialises in personal finance. More than a decade of working in editorial teams, she offers highly tailored content covering a number of topics. Read more