Don't let your bank rip you off! - Video script

Find out why packaged current accounts are a waste of your money

Has your bank tried to persuade you to upgrade your ordinary current account to a packaged one with more extra benefits than you shake a stick at?

Say no to a packaged account

If they have, I hope you said no. That’s because these accounts always come with a monthly fee which I don’t think can be justified.

Think about it this way: in return for a monthly charge - which could cost you anything from £5 to £25 - you’ll normally be offered a range of freebies such as travel insurance, AA breakdown cover and identity theft protection. Meanwhile, add-ons like mobile phone insurance, preferential rates on the bank’s financial products and even a small fee-free overdraft may also be included.

Why do packaged accounts offer you a poor deal?

But the trouble is I don’t think packaged current accounts offer a good deal, because most account holders don’t make full use of the benefits, which means they end up paying for an ordinary bank account which everyone else is getting for free.

Which current accounts should you choose instead?

If you’re keen to switch banks, I think you should choose a new account based on how good the rates paid on your balance are if you usually stay in the black. Or, look out for a free overdraft facility if you sometimes slip into the red.

In the black

There are some great best buys about at the moment. If you normally have a generous balance, choose the Premier Direct Current Account from Alliance & Leicester or the In-Credit Preferred Rate Account from Santander. Both pay an interest rate of 5% fixed for a year on balances up to £2,500. Just remember, you’ll only earn 0.1% on amounts over £2,500 and the rate drops to 1% once 12 month’s is up.

In the red

The Premier Direct Account also comes up trumps for free overdrafts with a 0% facility which lasts for a year. You’ll also get the same deal with A&L’s Premier version of the account, and Santander’s Preferred Overdraft Rate Account. But don’t forget overdraft charges will apply to all these accounts the following year.

Compare current accounts at lovemoney.com