Added value account costs rise

The average monthly charge for each incentive is now £1.19 according to one of the findings of Defaqto's Retail Banking Report 2009.

Visit your local bank branch and the chances are that occasionally you'll be asked whether you would like to change your current account to an added value current account with lots of incentives. The teller staff will generally be incentivised or targeted to sell such products.

The number and cost of added value current accounts continues to rise.

David Black, Principal Consultant of Banking at Defaqto and author of the Retail Banking Report¹, said: "It is no surprise to see the number of available added value current accounts increasing as there is great eagerness on the part of the banks to migrate customers from their free in credit current account counterparts. For the banks the attraction of added value current accounts is that they provide a guaranteed monthly income stream."

"The average added value current account offers 11.62 incentives, which at the average monthly fee of £13.87, equates to an average monthly charge of £1.19 per incentive."

"For the individual the main consideration is whether you actually want the incentives offered and, if so, whether it is both suitable and cost effective to get it through the added value current account. For example if your main holiday involves skiing but the policy doesn't cover winter sports it will not be an appropriate policy."

"Monthly fees charged for added value accounts vary between £3 and £25. It is not unusual for a bank to offer a range of added value current accounts with an entry level version at a relatively low monthly fee and fewer incentives, a middling version, and a premium version with more extensive incentives and a higher monthly fee."

"The highest value incentives offered tend to be motor breakdown cover and travel insurance but there is a big difference in the levels of cover available. In respect of travel insurance: some policies cover winter sports but others do not; some cover only the individual whereas others include cover for a partner or for the entire family; some cover travel worldwide and others just cover Europe."