Why Packaged Accounts Aren't Worth It

Do you pay a monthly fee for your current bank account in return for 'free' extras? If so, are you really getting value for money?

I've never been a big fan of so-called 'packaged' bank accounts. These are current accounts that entail you paying a monthly fee in return for fringe benefits such as 'free' annual travel insurance, car breakdown cover, discounts on package holidays, free card protection and mobile phone insurance.

Depending on the benefits offered, they usually cost around £10-£15 a month although Lloyds TSB recently announced a sizeable increase from £15 to £25 for its Premier account customers - a move which other banks may follow.

One does wonder whether people really make full use of the extra facilities. There are usually caveats in the small print which make you wonder whether the purported savings you're supposed to be making are worth it anyway and many of the benefits can be bought more cheaply elsewhere.

Take mobile phone insurance as an example. Quite apart from the fact that you may well be covered by your household insurance anyway, one policy being offered by a bank that I looked at stated you weren't covered for loss, theft or damage to your phone 'where it has been passed to someone else'. So, if your best mate wants to borrow your phone to make a quick call to his wife and accidentally drops it, you're not covered.

And then there's the inevitable 'card protection' scheme which includes insurance for things that are quite unnecessary. For example, one policy offers cover for fraudulent use of credit, debit, and bank-issued charge cards - up to £1,500 for the 24 hours before reporting the theft and up to £75,000 thereafter. But under the Banking Code your maximum liability is only £50 for fraudulent transactions made before the issuer is notified (and, in most cases, issuers waive even this small liability) and, once you've reported the card as lost or stolen, there's no liability anyway. It's the bank's problem.

So unless you can really make good use of the benefits offered, avoid fee-paying accounts and go for one that simply pays a decent interest rate if you're usually in credit or has cheap overdraft charges if you're not.

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