Just a few years ago, paying a fee for a personal high street current account was unheard of by the majority of customers. Most would have baulked at the idea. Now, all of the main banks offer at least one premium packaged current account including a monthly fee and some offer several. In fact, there are now more varieties of paid for accounts to choose from than there are free ones. And uptake is rising – research puts the current number of active paid-for personal current accounts at above the nine million mark.
The basic premise with a packaged current account is that you pay a monthly fee for your bank account and in return you receive access to a number of additional services. The three most widely included are:
- Car breakdown cover
- Mobile phone insurance
- Worldwide multi-trip family travel insurance
How much do they cost?
Prices start at £5 per month for which you'll usually get any two of the above three. For somewhere in between £10 and £15 you'll generally get all three plus a range of additional facilities. For anything up to £20 and above you can expect a whole host more.
A quick calculation shows that these accounts could indeed save you money. If you'd normally require insurance for a smart phone along with a year's worth of worldwide travel insurance for a family of four and an annual domestic car breakdown policy, you’d be looking at a total bill of somewhere in the region of £160. With a packaged current account offering these services at a market average monthly rate of £12.50 you’d be looking at £150 for the year. At the very least you can hope to break even – anything else is a bonus.
The additional services across the spectrum of high street packaged current accounts include:
- Extended warranty cover for your domestic appliances
- Identity theft cover, which includes reimbursement of any losses and sometimes the cost of changing things like driving licenses and passports
- Preferential rates on mortgages, loans, overdrafts, credit cards, savings accounts, home insurance, car insurance and will writing services
- Discounts in high street shops, restaurants, hotels, attractions, private healthcare and everyday services
- Emergency cash from cash machines, using specially generated codes, if you’ve lost your card or had it stolen
- Life insurance including fixed sum payments in the event of death
- Home emergency cover which will pay out for things like broken boilers, window repair and lock and key replacement
- Air travel luxuries including use of first class lounges and concierge services
- Number storage, in case you lose the contact data from your mobile phone
- Purchase protection, covering damage or loss on items you've brought using your debit card
- Price promise, where you'll be refunded the difference if you find any product you've brought using your debit card somewhere else for less
The number of these extra facilities available to you and the scope of the service depend on how much you pay.
In terms of overall savings, the banks quote anything from £200 per year for the cheapest, most basic packaged current accounts to over £1200 for the most expensive. These figures rely on you using all of the services and they may be inflated ever so slightly – the chances are you could beat the banks estimates of the individual costs of the services if you shopped around – but it’s clear that there are opportunities for savings.
How else can you save?
Some banks offer a monthly bonus payment – usually around £5 – if you pay over a certain amount into your account each month. Wages and other BACS credit count towards the total. In addition, some banks will give you one off cash payments when you switch to their packaged current account from a competitor and others offer cash back on purchases using your debit card. These can be used to partially offset the cost of the account.
There’s not just monetary savings to be had though; there’s time too. How long does it take you to ring around all of these different service providers or fill in the forms and check prices online every year when you need to renew your policy? A packaged current account takes that problem away – the services will remain active as long as your monthly direct debit does, provided, of course, the bank doesn't change its policies, in which case you'll be informed.
Ensure that the features of the services you get with your packaged current account are the same as what you’d get if you bought the policy separately and directly from the provider. For instance:
- Does the car breakdown cover come with home start recovery?
- Will the travel insurance cover you for winter sports holidays?
- Are you covered for loss of your mobile phone or only theft and damage?
You won’t be happy if you end up having to pay twice.
As always, read the small print and find out if you'll be excluded from using any of the services because of your age, your life circumstances or the items that you want to cover using the account.
In the end, though, the only way to tell if a packaged current account is a cost effective option for you is to work out which services you would use anyway and work out the total cost if you paid for them separately and compare this to the overall cost of the account. When you do this, make sure you aren't already entitled to some of the services through other products you pay for. Sometimes car insurance providers throw in breakdown cover as a sweetener, as do mobile phone companies with phone insurance.
Don’t just dismiss the idea out of the principle of not paying for a bank account when you can get one for free though; for the right person, a premium current account could save a packet.
To compare packaged current accounts from the UK's leading providers click here.
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Current Accounts Guides
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- Switching current accounts
- Student and graduate accounts guide
- Do you need a business bank account?
- Internet banking and security guide
- Should you get a packaged current account?
- Important considerations for your business banking
- Alternative Banking Guide
- Managed bank accounts guide
- How to complain about financial services
- Current accounts: considerations and warnings