Money: The banks want you as a VIP

Up-market current accounts offer plenty of extras, but are they worth the cost? asks Stephen Pritchard
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The Independent Online
If you want to flaunt your importance, and your gold credit card is not enough, then open a gold current account. For a few pounds a month, NatWest and Lloyds Bank customers can upgrade to a "gold" account. Several other banks have similar products, which give you lots of bells and whistles such as discounted overdrafts, life insurance and cheap hotel rooms.

Although the banks actively market these accounts to customers, millions of us have so far resisted the chance to pay for banking when we can get it free. As a result, Lloyds re-vamped its Gold Service last month and it now goes way beyond financial services, promising 20 per cent off high- street prices on more than 2,000 electrical goods.

If you want to buy a new washing machine this may be useful, but otherwise the cost mounts up. Barclays and NatWest charge pounds 6 a month, Lloyds charges pounds 8.

A few banks have even more expensive, "premier" fee-paying services, which guarantee you a dedicated personal banking manager. NatWest's Advantage Premier account costs a one-off pounds 150 a year, and Royalties Gold is pounds 9 per month.

The banks argue that the services you get for your money would cost far more on the open market. Barclays gives its Additions customers free accidental death cover of pounds 10,000, a will- writing service, discounted private health insurance for children, and the use of a 24-hour legal assistance phone service.

But most of these extras are spurious unless you remember to use them. "The extras offered by these bank accounts may prove useful for some," suggests Justin Modray, investment adviser with the independent financial adviser Chase de Vere. "But for the majority, they are about as useful as a chocolate teapot. The extras are generally very limited: extended warranties, life cover and free travel insurance offers will generally compare poorly with other policies in the marketplace."

However, these accounts may be worth while if you often go overdrawn. Banks regularly charge customers who are overdrawn, even with permission, in the form of service charges or "usage" fees. The banks argue that saving this alone will repay most of the charge for the account. The Royal Bank of Scotland Royalties account offers a much cheaper interest rate on overdrafts for Royalties customers: 12.6 per cent for amounts less than pounds 1,000, against the normal rate of 19.56 per cent.

At Barclays you must have an Additions account to get a pounds 100 free "buffer zone", and no fees on agreed overdrafts.

Barclays claims around 900,000 customers for Additions. Other banks won't talk numbers but admit these accounts are not for everyone. Peter McNamara, managing director of Lloyds TSB personal banking, says: "The Gold Service is aimed at people whose income levels are modestly up-market. If you keep pounds 1,000 in the account, it is free, and a third of our customers never pay for it at all."

If you are more than a "modestly" high earner you may be interested in accounts from Citibank or Flemings, which have minimum income levels but offer good deals.

The Citibank account is run over the phone or internet (although the bank does have a handful of branches in the UK) and is aimed at those with a household income of pounds 30,000 or more a year. It pays interest on credit balances and offers the chance to integrate a mortgage loan with the current account (this is also what the Virgin One account, First Active Bank and Kleinwort Benson offer).

If you are prudent with cash and do not need the discipline of carrying out a mortgage payment every month, it can make great sense to keep all your banking and loans in one place.

The Flemings Premier telephone account is free for customers in credit and pays interest. It also offers generous overdrafts - interest is charged at 2.5 per cent above base rate - although there is a pounds 5 monthly fee for overdrafts.

Contacts: Barclays Additions, 0800 001011; Citibank, 0800 008800; First Active, 0800 005008; Flemings, 0800 0923300; Kleinwort Benson, 0800 317477; Lloyds, local branches; NatWest, 0800 592934; Royal Bank of Scotland, 0800 121121; Virgin One, 0845 600 0001.

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