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Guide to packaged accounts

A packaged bank account is a type of UK current account for which you pay a monthly fee. In return, you will be offered a number of perks and benefits. These can vary from travel insurance and breakdown cover to better interest rates. Consumers that fail to do the correct research could end up paying hundreds of pounds for an account that offers them no more than a free current account or basic account. However, savvy shoppers will realise that the added extras can also save money.

Mini packages representing packaged accounts

It is important to note that there has been an increase in complaints about packaged bank accounts to the Financial Ombudsman Service (FOS) - If the bank changed a standard current account to a packaged account without your knowledge or consent, you could be eligible for compensation.

This guide will help you decide whether a packaged bank account is right for you.

What do packaged bank accounts offer?

The benefits available from packaged bank accounts depend on the bank or building society, the account, and the level of service. However, the most common perks include ‘free’ travel insurance, breakdown cover, mobile phone insurance, foreign currency, identity fraud insurance, credit reports, airport lounge deals, extended warranties on purchases, in-credit interest, and a discounted overdraft.

Some providers will also offer different rates on other products, such as savings accounts, loans, credit cards and mortgages, but it's important to remember that while these benefits are ‘free’, you are actually paying for them through the monthly or annual fee.

What do packaged accounts cost (& are they good value?)

Packaged bank accounts cost anywhere between £2 and £20 a month, depending on the bank and the benefits.

While there are a number of features on offer from packaged bank accounts, there is a chance that it might actually cost less to buy the perks separately, this is why extensive research can payoff.

It is also important to consider whether you will actually use the benefits on offer. If you don’t plan to, or you have no need to, then a packaged account is likely a waste of money, as you’ll technically be paying for everything twice.

On the other hand, if the free perks are products that you would ordinarily be buying anyway, it could prove to be excellent value for money and offer hundreds of pounds in annual savings.

Packaged account insurance

The insurance on offer from the banks is usually only the most basic level of cover, depending on the account taken out, so unless you’re sure this covers everything you need you could be left without adequate protection.

It’s also worth taking a close look through the terms and conditions of the policy as you might find you’re not even eligible to claim for certain things, due to requirements not being met such as age, for example.

It’s possible that you might already pay for cover on offer from the account – not directly, but via another policy. Contents insurance often covers personal possessions outside the home, car insurance may offer breakdown cover, and so on, so it is worth double checking to save even more money.

You might also need to activate the free services before you can use them. Some people assume that once the bank account is up and running, so are all the features & benefits. Unfortunately, this is not always the case, particularly with mobile insurance, you’ll need to register your phone before you get the available protection.

Have you been mis-sold?

After the PPI mis-selling scandal, consumers have been more aware of pushy sales staff and upgrades on financial products. As such, the FOS has seen complaints about packaged accounts soar by 155% in the nine months to January 2014.

Eight in 10 of the complaints are being upheld, so if you have a packaged bank account that you didn't know you were paying for, or were bullied into taking the account in order to get a loan or a mortgage, you may have been mis-sold. It is worth checking as you could be eligible to claim back the money.