Are packaged current accounts worth the money?

The majority of the banks offer packaged current accounts, but are these accounts really worth the monthly fee and do any of these accounts offer a better deal than the standard current accounts?

Michelle Slade, analyst at Moneyfacts.co.uk comments: “With us all currently waiting on the outcome of the OFT’s test case in the High Court with banks over charges and with speculation rife that free banking may be a thing of the past if the OFT wins, packaged current accounts may become increasingly popular.

“In exchange for a monthly fee of up to £25 packaged current accounts usually offer better credit interest and authorised overdraft rates as well as a benefits package, but this isn’t always the case.

“The accounts from Barclays, Citibank, Co-op, NatWest, Royal Bank of Scotland and Yorkshire Bank pay some of the lowest rates of credit interest on the market. Lloyds TSB, along with NatWest and Royal Bank of Scotland, also charge some of the highest rates for an authorised overdraft.

“The benefits packages on these accounts vary from bank to bank and also by how much you pay each month. Typically they offer worldwide travel insurance, car breakdown cover, mobile phone insurance and preferential rates on other products available from the bank.

“These benefits can be quite attractive but only if you take full advantage of them, so make sure you register for them and make sure they fully meet your needs. How beneficial is car breakdown cover if it only covers you on a limited distance from your home? Alternatively, how often do you lose your mobile phone?

“From 1 May, Lloyds TSB will increase the monthly fee on its Gold Service and Platinum current accounts by £2 per month to £12pm and £17pm respectively. In return for the additional fee, account holders will receive an increased mobile phone insurance cover up to £2K, ‘save my numbers’ – which backs up customer numbers in their mobile phone and Airmiles if customers book holidays through the Lloyds TSB Travel Service.

“The £1 foreign usage retail transaction charge will also be scrapped on Platinum and Premier accounts. However, this charge is one that majority of other banks and building societies don’t make.

“By transferring to one of the best buy current accounts you could not only save up to £300 through not paying the fee but in the case of Alliance and Leicester’s Premier Direct current account you will receive 8.19% on balances up to £2.5K. The savings you make will more than likely pay the cost of buying some of these benefits independently.”