Personal Finance: All-singing, all-dancing and all to no avail

Do we really need multi-function current accounts? asks Kathleen Hennessy

"MULTI" is the buzz word for the 1990s. Personal computers are now multi-media and digital television means multi-channel entertainment.

Not to be outdone, UK banks now offer multi-function current accounts. These added-value current accounts come with all sorts of perks (see box) from legal advice, life insurance and travel cover to purchase protection and discounts on various goods and services.

All this is in addition to the standard current account features like chequebooks, cashcards, standing order and direct-debit facilities, and overdraft facilities.

So what's the catch? Well, few things come free and these added-value accounts are no exception. They all charge for their services, up to pounds 150 a year.

And what do you get for your money? Each account has its own range of extras and customers also get preferential rates on overdrafts or free overdrafts up to an agreed limit. Sometimes there are discounts on personal loans.

Royal Bank of Scotland's Royalties account costs pounds 4 a month and provides a range of heavily-hyped benefits, including an agreed fee-free overdraft of up to pounds 15,000, subject to status. You'll still pay monthly interest, though it is charged at preferential tiered rates, from 9.38 per cent to 10.69 per cent.

"If we agree an overdraft of pounds 100 or more, you won't pay any interest if your overdraft doesn't exceed pounds 100." said a Royal Bank spokesperson. However, Royal Bank's standard interest-paying current account has an automatic pounds 100 overdraft and overdrafts up to pounds 300 are free. Beyond pounds 300 overdrafts cost from 12 to 15 per cent, depending on the amount overdrawn.

TSB trumpets the fact that its Select account offers free cheque deposits and transfers, free standing orders and direct debits, and free statements. So it is not unlike most current accounts these days - except that it costs pounds 3 a month.

Barclays also makes a big deal about these features on its Additions account, perhaps forgetting that Abbey National introduced transaction- free banking for accounts in credit in November 1987.

You will pay referral charges with most banks for any transactions that go through your account while you are overdrawn. But you could get a standard free overdraft of pounds 300 with Abbey National, pounds 250 with Bank of Scotland and First Direct, or pounds 100 with Clydesdale Bank.

If your credit requirements are a little larger you may be tempted by the preferential loan rates offered by a fee-paying account. Royal Bank's Royalties Gold, for example, offers a 1.5 per cent discount on the bank's normal personal loan rates for loans over pounds 3,000; 1 per cent for loans under pounds 3,000. This reduces the APR for a pounds 5,000 loan with Royalties Gold to 14 per cent.

You could borrow the same amount from Northern Rock and pay just 9.9 per cent APR.

Royalties Gold charges pounds 9 a month - adding up to pounds 108 a year in charges on top of the quoted fees for the pounds 5,000 loan.

The added benefits on these accounts can be worth while, provided you fit a particular customer profile. For example, Lloyds Bank Gold Service Account offers free annual travel insurance for you and your spouse or partner.

The account costs pounds 8 a month, or pounds 96 a year. An annual travel policy for a couple can be had for pounds 99 from Worldwide Travel, so there is no great saving - unless you maintain a minimum balance of pounds 1,000 in your account during the monthly charging period, in which case the monthly fee is waived.

Similarly, the commission-free foreign currency and traveller's cheque services offered by Royalties, Royalties Gold, Lloyds Gold Service and NatWest Advantage, and the free traveller's cheque service offered by TSB Select, can be good value for money - but only if you buy holiday money frequently enough to outweigh the monthly fee for the account.

And then there are the unusual add-ons, like Additions' 24-hour legal helpline. The average individual uses a solicitor just three times during a lifetime - twice for conveyancing and once for probate services. So why pay pounds 60 a year for legal advice at 3am?

Similarly, why pay a monthly fee for any of the supposedly "extra" services when they come as standard with other accounts offered by the same banks?

Royal Bank's Royalties, for example, mentions that it comes with a combined switch, cheque guarantee and cashpoint card. But then so does the interest- paying current account offered by Royal Bank - as do the standard current accounts from most major banks.

There may well come a day when we all have to pay for the bank's services, but it is worth resisting while you still can.

Kathleen Hennessy is assistant editor at `Moneywise' magazine.

The new breed of current accounts

Account Account Monthly/ Overdraft Preferential Features

provider annual fee rate loan rate

Royal Bank Royalties pounds 4/pounds 48 12% APR 1% discount on Discounts on holidays, flights, ferry crossings, of Scotland standard rates car hire, hotel accommodation and travel

insurance; free valuations for Royal Bank mortgage customers; higher rates on instant access savings accounts; special terms on Royal Scottish Assurance policies; discounts on PEPs and unit trust fees; discounts on phone calls, CDs, cassettes, videos and computer games; pounds 500 off cost of new car; free card protection, purchase protection and

extended warranty service; and pounds 5,000 accidental death cover.

Royalties pounds 9/pounds 108 10.2% APR 1.5% discount on As above, plus free annual travel insurance; Gold standard rates access to airport executive lounges; higher

rates paid on notice savings accounts;

discounts on restaurants, health clubs, theatre

tickets, home insurance; and pounds 10,000

accidental death cover.

Lloyds Gold pounds 8/pounds 96 13.8% APR N/A Free annual travel insurance, commission- free

Service traveller's cheques and foreign currency, legal and medical help while abroad, fee-free gold credit card, card protection, purchase

protection and extended warranties.

Barclays Additions pounds 5/pounds 60 18.8% EAR N/A Purchase protection, card protection, 24-hour

legal advice helpline, will-writing service up to

pounds 94 a year, discount medical cover for children

with PPP Healthcare at pounds 2.50 per child per

month and pounds 5,000 life insurance cover.

NatWest Advantage1 -/pounds 150 10.74% EAR 10.3% APR Free purchase protection, card protection and

on pounds 8,000 loan extended warranties, free annual travel

(sample) insurance, discounts on flights, holidays,

cruises, ferries, car rental and hotel

accommodation, commission-free holiday

money, holiday information service, discounts

on CDs, wine, leisure goods, DIY and

gardening equipment, theatre tickets and

restaurants.

TSB Select pounds 3/pounds 36 18.8% N/A Card protection, purchase protection and

extended warranties, higher savings rates, free

legal helpline, pounds 500 off the cost of a new car,

commission-free traveller's cheques, pounds 5,000

accidental death cover and telephone shopping service.

Available only to customers earning pounds 50,000-plus