Is this the end for packaged accounts?
Banks are having a rethink, and consumers may benefit. By Chiara Cavaglieri and Julian Knight
The packaged current account market could be on its last legs, with Santander the latest bank to pull the "added-value" products from its shelves. Packaged accounts have proved popular, with about one in five UK adults paying anything from £8 to £25 a month for a current account with "extras" such as travel insurance and premium customer service. At their worst, however, it's money down the drain for a service that is usually free plus a few limp products that you never use, or aren't even eligible for.
Consumer groups and regulators have already waded in amid concerns over mis-selling. Complaints to the Financial Ombudsman Service (FOS) are on the rise and the uphold rate is high. In the past three months the FOS received 736 new complaints about packaged accounts, compared with 1,629 cases during the whole of last year. The ombudsman finds in consumers' favour in two-thirds (66 per cent) of all cases referred to it.
"We do receive a significant number of complaints about the products 'packaged' with the accounts, from mobile phone insurance to travel insurance," FOS spokesman Rory Stoves says. "These problems tend to arise when people come to make a claim – only to find that their policy offers only limited cover or pays out only under the most particular of circumstances."
If the no-win, no-fee brigade turn their attention to packaged accounts, to attack banks as they did when the payment protection insurance (PPI) scandal blew up, it is no wonder some banks now think they simply are not worth the effort.
From October about 300,000 customers will be kicked out of Santander's reward and premium accounts and reverted to free accounts without perks – a move that follows the temporary withdrawal of Lloyds' packaged accounts and the closure of Co-operative Bank's paid-for accounts.
Of course many other banks are still happily turning a profit from these accounts and aren't so willing to change tack, but are any of them actually worth paying for?
The good news is that there has been a clampdown on the way that banks are allowed to sell packaged accounts, and it isn't the minefield it once was. In March 2013, new rules were introduced forcing banks to first check that customers would actually be able to make a claim on any insurance-based extras, and then provide annual statements so that people can check whether the benefits still suit their needs if their circumstances have changed.
So, once you're sure that you could potentially make use of the benefits on offer you need to check the details. At first glance, this will largely be down to preference. If you like films and music, for example, the NatWest/RBS Select Silver account costs £10 a month and comes with LoveFilm subscription worth £5.99 and five free downloads from HMV each month, as well as annual multi-trip European travel insurance with winter sports cover and mobile phone insurance.
The Post Office packaged account is a little cheaper at £8 a month (£96 for the year), with the main perks being European family travel insurance and breakdown cover from Green Flag. However, a quick search on a comparison site reveals that you could take out a similar travel insurance policy with CoverForYou.com for only £65 and annual breakdown cover for as little £30 – still only £95 in total.
Nationwide's FlexPlus account is also £10 a month but makes more sense if you're usually in credit because you earn 3 per cent interest on balances up to £2,500. The packaged benefits are also more encompassing as you get worldwide family travel insurance with winter sports cover, UK and EU breakdown cover, plus worldwide mobile phone insurance.
Kevin Mountford, a banking expert at MoneySupermarket, says: "For those looking for a one-stop, convenient solution, then packaged current accounts certainly have a part to play. However, make sure you will make the most of the benefits on offer otherwise you may be paying far more than you need to. The key is to think about how you use your current account, and then shop around for the deal that best suits your needs."
Beyond the headline features, you must read through the fine print. Understanding the exclusions is a priority. For example, many banks insist that travellers aged 75 or over must pay an annual £50 premium to be eligible to claim on travel insurance policies. Find out how much money you have to pay towards any given claim – known as the excess – and whether there is limit on the number of claims. NatWest Select Silver customers, for example, pay an excess of £75 per claim and are limited to two claims in any 12-month period.
If you're still tempted by packaged accounts, there are products that offer something of a halfway house, such as the Santander 123 account which costs £2 a month in return for cashback on direct-debit payments for household bills and in-credit interest of up to 3 per cent. Barclays also offers flexible add-on packs, enabling customers to mix and match various benefits.
This may indicate the way the market as a whole is heading, and in the not-to-distant future we may find that all of the UK banks charge a fee for even the most basic current accounts.
Charlotte Nelson at the comparison website Moneyfacts.co.uk says: "Eligibility is often an issue when it comes to insurance so it is quite possible that more accounts will come on to the market charging a small fee for various account benefits such as high credit interest or a better overdraft facility. It will be interesting to see if the current account market becomes more tailored, rather than the 'one size fits all' we have at the moment."
In the meantime it pays to concentrate on the truly important features as many current accounts, both standard and packaged, pay little or no interest and many impose hefty overdraft charges.
Consumers have always been slow to switch providers – largely because of the process – it currently takes between 18 and 30 days to transfer from one bank to another. But this will be soon be much easier. From September this year banks will have to limit the time it takes to switch to just seven working days.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
Kate Hudson's online sports brand Fabletics drains your account if you don't say 'stop'
Bargain Hunter: Exclusive discount on a SmartGlider - a self-balancing electric scooter
My Tinder date asked for a refund when I declined a second meet up
10 tips for taking out a personal loan
The 10 Best money-saving sites
- 1 President Obama leaves touching comment on Humans of New York photo from Iran
- 2 If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
- 3 The Chinese city where men have 'three girlfriends because there are so many women'
- 4 German police forced to ask public to stop bringing donations for refugees arriving by train
- 5 Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition
Britain to take more refugees as Cameron bows to pressure after more than 250,000 back our campaign
Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...
£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...
£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
Day In a Page
In an elevated position above the bay, this four-bedroom home offers sea and headland views. There is a decked balcony and sun terrace - plus coastal walks on the doorstep.
With four bedrooms, this spacious maisonette in a mid-terrace period-style house in Holland Road is well-maintained and offers high ceilings and period features.
The terraces of this two-bedroom penthouse apartment offer panoramic views that stretch over fifty miles from the cliffs of Beachy Head.
In the heart of the coastal village of Mumbles and moments from the pier, this five-bedroom Victorian terrace is set over three floors and retains many original features.
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.