You might be surprised to discover that if you own a car, go abroad more than once a year and have an expensive mobile phone it could be worth your while to pay for your current account – but be very careful where you buy.
In a comprehensive study into the value of fee-paying “packaged” accounts by consumer group Which?, to be published on 25 October, it found that the very best offering, Nationwide’s FlexPlus, comes with add-ons that amount to triple the annual cost of the account.
For £120 a year, account holders get travel, breakdown and mobile phone insurances worth £416, it concluded.
However, the study shows the huge disparity between the value of paid-for accounts with the worst, Select Silver from NatWest/RBS, offering perks worth just £87 – that’s £33 less than the £120 annual cost.
Packaged accounts typically cost between £8 and £17 a month. They have been around for almost 20 years but have long been branded a “rip-off” by many consumer groups. Despite their popularity – there are 9m held in the UK – this controversy continues.
In the last financial year, the Financial Ombudsman received 5,667 complaints about packaged accounts, a whopping 248% rise on the year before.
Many involved the sale of the product, with some people discovering they had been paying for the accounts without their knowledge and some, usually older people, only realising at the point of a claim that they were not covered by the travel insurance.
Last year, the former City watchdog, the FSA, tightened up the rules in a bid to put a stop to the next big misselling scandal. Some of the bigger banks withdrew their products and some later released improved offers.
“It’s vital providers are upfront about what is included, and inform their customers when they’re no longer eligible for perks (such as the travel insurance),” said Which? executive director Richard Lloyd.
“We want the Financial Conduct Authority to rigorously enforce the new rules that protect consumers and ensure that providers have cleaned up their act.”
He added: “Packaged accounts can be value for money but only if people make use of the added benefits they’re paying for.”
That’s why even the top-scoring Nationwide account is only good value for those who want fully comprehensive breakdown cover, head overseas enough to make use of the travel insurance and have a phone valuable enough to warrant some form of cover.
For those who will use them, the add-ons are good, with the building society offering the most comprehensive cover in all the categories Which? compared – travel, breakdown and mobile phone insurance.
Its travel insurance covers a family worldwide, including in the USA and, crucially, covers those up to the age of 74.
Its breakdown cover, provided by Britannia, was given a policy score of 100% by Which?, offering drivers home start, roadside assistance and cover in Europe.
Even its mobile phone insurance, a product that is often dismissed as pointless, was given an acceptable 77% score.
This is all in stark contrast to the NatWest/RBS Select Silver account, which comes with no breakdown cover and has travel insurance that only covers an individual aged 69 or under, travelling within Europe.
After the Nationwide account, but with a much lower overall rating, Which? ranks the £120-a-year Halifax Ultimate Rewards as second best-buy (though some of its terms and conditions will be changing from 1 December 2014) and RBS’s £192-a-year Select Platinum as a close third.
Of course, it’s not just the add-ons that need to be considered in choosing a packaged account but also the interest paid to those in credit, as well as the overdraft rates and interest-free limit, if relevant.
