Packaged accounts offer their holders extra benefits for a small monthly fee.
What features are included in packaged bank accounts?
The benefits may vary by account and some usually include products which consumer would buy anyway and thus can help you save a considerable amount of money. Some of the benefits may include:
Insurance products - including travel insurance, phone insurance, gadget insurance and ID fraud cover
Motor breakdown cover
Foreign currency exchange with no commission fees or improved exchange rates
Discounted rates for additional financial products offered by the bank or building society
What to look out for when opening a Packaged account?
Before opening the account, take note of the below points:
The insurance you get may be pretty basic – it might not give you the level of cover you need
You may not need all the benefits attached to the account, or may be covered elsewhere
With some banks, you have to activate each of the services before you can use them. Check whether you need to do this when you open the account, otherwise you may find that your insurance is invalid and that you have been paying for something you can’t use.
Should you choose a packaged account?
Packaged accounts are a good deal for some, but not all. If you’re thinking of getting one, ask yourself:
How many of the extras do I really need?
Does the insurance give me the right amount of cover?
Could I get the services separately for less?
If the account gives me an interest-free overdraft, am I currently paying overdraft fees and charges higher than the cost of the packaged account?
Can my bank move me to a packaged account?
Your bank shouldn’t move you from a free current account to a packaged account without your permission. A move should also not take place unless the bank is moving all its free account customers to charged accounts.
What do packaged accounts cost?
Depending on the bank or building society and the extras included, the monthly fee can range anywhere between £2 and £25.
New Legislation for Packaged Accounts
Given the increased uptake of packaged current accounts and recent mis-selling scandals the FSA (now the FCA – Financial Conduct Authority) was concerned about the possibility of insurance policies being mis-sold through packaged accounts. Thus, since March 31 2013 a new set of rules has been in place.
Banks, Building Societies and any other type of organisation offering packaged current accounts must:
Ensure that the customer is eligible to claim under all policies offered and informed about it.
Check whether a policy is appropriate for the customer, and if not, inform them about it.
Offer customers annual eligibility statements which urge them to check if their policies still cover their needs.
What alternatives are there to Packaged Accounts?
For many people who have grown up in the era of free banking, the idea of paying for bank accounts will seem very alien. Equally people who don’t need or want the features offered with packaged accounts might find they are paying for something they will never use. Remember there are still good alternatives to packaged accounts in the UK. Many standard UK current accounts do not charge a monthly fee to customers and certain prepaid bank accounts will charge lower fees – of course they will also offer more limited functionality as a result.
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