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What's in your package?
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Package Accounts -The Death of Free Banking?
Compare Current Accounts
Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk
With the potential death of free banking on the horizon, we ask - is it worth paying for a packaged current account?
The UK is one of the only countries in Europe that still offers free banking, but this could all be about to change. The Office of Fair Trading is currently in a High Court battle against eight major banks over unfair overdraft charges. If these charges are declared “unfair” and ruled against, many predict that banks will look elsewhere to make their profits and start charging for the privilege of banking.
If this does happen, “added-value” package accounts may seem more attractive. According to Which?, more than eight million people in the UK are already paying for packaged current accounts, which nets the banks at least £850 million each year. But what are the advantages of paying to bank? Are the perks worth the charge? We investigate.
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What is a packaged account?
Packaged or “bundled” accounts cost you a monthly fee, in exchange for which you are offered a range of benefits and services. Although these benefits are promoted as “free”, clearly you are actually paying for them.
The perks vary from bank to bank and also by how much you pay each month, but may include:
Whilst it may seem patently obvious, these services are only “good value” if you actually use them. It is also important to remember that often some services which are included in the package will require you to register separately before you can make use of them.
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How much do they cost?
Generally, these accounts cost around £10 to £15 a month (£120 to £180 a year), but they can be more expensive. Barclays charges up to £25 for its Premier Life Account, which is aimed at high earners and, as well as the usual perks, includes a “Lifestyle Management service”. Barclays claims to provide you with a team of “experts” and promises to organise services from sourcing concert tickets to finding you an electrician!
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Where can I get one?
Most high street banks now offer packaged accounts. This table shows a selection of what’s on offer:
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Benefits Included |
| Company |
Package Name |
Monthly Cost |
Worldwide Travel Insurance |
Car Breakdown Cover |
Identity Theft Assistance |
Mobile Phone Insurance |
Extras |
| HSBC |
Bank Account Plus |
£12.95 |
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£50 cashback on new home or car insurance policies |
| Natwest |
Advantage Gold |
£12.95 |
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25% off selected gigs and shows |
| Barclays |
Additions Active |
£14 |
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24/7 Legal helpline |
| Lloyds TSB |
Gold Account |
£7 for first three months, £12 thereafter |
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Interest free planned overdraft |
Compare all current accounts>>>
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Are they worth paying for?
With package accounts, the value really depends on your individual needs and whether you will take full advantage of the benefits offered.
Barclays claim their Additions Active account (with an annual cost of £168) offers an annual benefit of up to £680, which is a lot of cash. However, you will only effectively be “saving” £680 if you make full use of all the benefits offered and crucially, if they are services you would normally have had to purchase anyway.
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Case Studies
We can see the relative value of packaged accounts with Jake and Maggie:
Jake is a jet setting businessman who spends many hours driving to and from the office and is prone to misplacing his flashy mobile phone. He takes multiple trips abroad, often taking his whole family with him and being a big music fan, he likes to get the best offers on gig tickets. His annual costs are:
- Worldwide Family Travel Insurance – £80
- Mobile Phone Insurance – £60
- Breakdown Cover – £38
- TOTAL - £178
The Lloyds TSB Gold Account would suit Jake perfectly, offering the services he needs for a first year cost of £129. If he opened this account he would save at least £49 off his annual costs as well as saving 25% on tickets for gigs and shows.
Maggie doesn’t own a car, owns a cheap functional mobile and makes one trip to France each summer. Her annual costs are:
- Annual Costs: Single Trip Travel Insurance – £12
- Cost of replacing mobile (if necessary) – £10
- TOTAL - £22
Package accounts are not for Maggie as her relevant annual costs only amount to £22 and she would not benefit from the services offered. She would be much better off with a standard current account.
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Recommendations
- It is crucial that you work out the savings that you personally will make by opening a package account. Package accounts can save you money, but it’s important to do the sums first.
- Check that the cover offered, for example with travel insurance, is at the level you need. Make sure the policy includes cover for the duration of your holidays and not just while you are “travelling” (on transport).
- Your specific needs may change from the time of opening the account. If you find that you are no longer benefiting from the extra services, be sure to look around for a more suitable deal or return to a standard current account.
- If you have an adverse credit history and are having difficulties opening a standard current account, accounts like the One Banking Account One Banking Account might be a good resort. The One Banking Account, which comes with a Prepaid Credit Card, costs £12.50 a month and whilst it doesn’t offer services like other “paid for” accounts, there are no credit checks and the account management team will help you manage your finances.
- Bear in mind that many credit cards offer free travel insurance, so if this is the most relevant benefit for you, you may be better off with one of these.
Read our guide to switching current accounts.
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