Ffrees unveils current accounts that help you save while you spend

The new current accounts are open to anyone, can automatically save as you spend and use online ‘jam jars’ to help manage money. We take a closer look.

Ffrees has launched a range of current accounts designed to get us saving and budgeting better.

The company first appeared back in September 2012 with a prepaid family reward card. It offered shopping reward points that turned into cash, which could be used to invest into savings trusts for kids.

Building on this idea Ffrees has linked the scheme to a trio of current accounts. As well as automatically saving reward points (which can be exchanged for cold, hard cash) which you accrue when you spend at certain partners, the current accounts can also help you manage your money through online ‘jam jars’ that help separate money for essentials.

None of the accounts require a credit check, which means anyone over the age of 18 is almost guaranteed to get one, so they're perfect for the people the banks just don’t want. That might explain why 10,000 people have opened an account so far.

But are the Ffrees accounts a safe place for your money? We take a closer look.

The current accounts

Ffrees has four current accounts to choose from, which come with a prepaid Ffrees Visa Card you can load with money to spend as well as an online account you can use to separate money into 'jam jars' to help you budget better.

All three offer Ffrees Savings Points when you spend at certain partners, which you can turn into cash and either save or withdraw. However, the amount you are able to build up varies depending on the account you go for.

The Ffrees Family Account is the basic version. It has no monthly fee as long as you deposit £100 each month, otherwise there’s a £2 charge. This account will earn an average 6% back on what you spend with partners, which Ffrees claims equates to £500 a year.

There’s also a standard monthly account called the Ffrees Family Account Plus. This account costs £2.50 a month, but for the fee you can earn an extra 12% in cashback on what you spend with the partners. The extra earning potential means you could end up with £560 a year according Ffrees' maths.

There's a premier account called the Ffrees Premium Account. For £5 a month you can get an average of an extra 25% back on what you spend, which could come to £625 a year. Finally, there's the Diamond Account, which pays an extra 40% cashback than the Standard account. It will cost you £10 a month.

The accounts work just like a normal current account; you can pay in your salary, wages or pension and set up standing orders or pay by bank transfer. However, you won’t be able to set up a Direct Debit just yet, but Ffrees says this feature will be coming soon.

Compare current accounts with lovemoney.com

Saving through spending

The prepaid Visa Ffrees Card earns Ffrees Saving Points when you shop.

You can earn a lump sum of Ffrees points on a particular purchase or a percentage of Ffrees Points based on the value of your purchase, online or in-store at over 1,000 retailers and service providers.

For example at the moment you can earn 35 Ffrees Points when you buy a dual fuel EDF energy tariff. And at the Savile Row Co. you can earn up to 7% of your spend back in Ffrees Points.

The Ffrees Savings Points you build up are automatically set aside and put into your Ffrees Savings Account. Each point is worth £1.

You can withdraw your Ffrees Savings Points in cash, providing you have 10 confirmed points.

However, you can earn annual interest in the form of a bonus if you build up your points. If you earn at least 100 Ffrees Points in a year you’ll get a 2% bonus on the balance in your account.

The downsides

First off the Ffrees accounts come with a raft of fees.

It will cost you 75p to withdraw money from an ATM with the basic Ffrees Account, 50p with the Plus and 25p with the Premium Account.

Next day payments will cost £5 with the Ffrees Account, £4 with the Plus Account and £3 with the Premium Account. An SMS alert will cost you 10p and there is a £2.50 charge to cancel your account.

There is also a charge for a replacement card of £5 and adding additional cardholders to increase your points earning power can cost you too. Additional cards cost £5 each on the basic Family Account, though the Plus Account offers one free while the Premium Account will hand over three free.

You can check out the full list of charges here.

But one of the biggest concerns is that the money held in the account in the online ‘jam jars’ or on the prepaid card are not covered by the Financial Services Compensation Scheme, which protects up to £85,000 of UK deposits per person per institution.

Ffrees says it is not regulated by the Financial Conduct Authority (FCA) as it does not take deposits. Money paid in by customers is held on account by a partner called Contis Financial Services Ltd, which is a member of Visa and regulated by the FCA under the eMoney directive, which means it has to hold funds in a regulated UK bank – but that will be little comfort to those that lose money if the company goes under.

Compare current accounts with lovemoney.com

Alternative accounts for saving and budgeting

The Ffrees accounts might suit those that haven’t been able to get a bank account before as the checks are minimal. Those that find it hard to put any money aside each month might find the points an easy way to save money, especially as these are automatically set aside for you.

But in terms of using the account as a savings vehicle, there are much better accounts around that offer more interest to help you grow your pot and don’t encourage you to spend in order to save.

The Santander 123 Current Account pays up to 3% cashback on household bills and pays up to 3% interest on balances up to £20,000.

Meanwhile the Nationwide FlexDirect pays 5% on balances up to £2,500 for 12 months and offers a 12-month interest-free overdraft, when you pay in £1,000 a month.

Elsewhere the Clydesdale Bank and Yorkshire Bank Current Account Direct offers to pay 4% on balances up to £3,000 until March 2015, providing you deposit £1,000 a month into the account.

For more on this trend of using you current account for savings read Why some current accounts beat top savings accounts.

Alternatively for those that would like an account to help manage money better the Secure Trust Basic Bank Account and the thinkmoney Personal Account are two which offer a similar service to Ffrees.

Neither will perform a credit check, you can split your bill money from your spending money using a prepaid card and most importantly these accounts are covered by the Financial Services Compensation Scheme.

Compare current accounts with lovemoney.com

More on current accounts:

How to switch your current account in 7 days

Post Office extends current account trial to 110 branches

Co-operative Bank and Nationwide launch new cash switching offers