But are packaged current accounts the new PPI?
New figures from the Financial Ombudsman Service (FOS) show complaints about fee charging packaged current accounts have shot up.
In the first six months of 2015 alone, the FOS received 25,500 new cases related to these products, more than in the whole of 2014 and second only to payment protection insurance (PPI) gripes.
The Ombudsman is now seeing around 1,000 complaints about packaged current accounts each week.
What’s the problem with packaged current accounts?
With a packaged current account you pay a monthly fee in exchange for a range of added perks. These can include gadget insurance, breakdown cover and European or worldwide travel insurance.
The problem is that providers sometimes sell packaged accounts to people who can’t make use of all the benefits.
[SPOTLIGHT]For example those aged over 65 may not be eligible for the travel insurance benefit on a packaged current account, as many policies have an age restriction on the people they will cover.
Providers now have to make it much clearer which benefits an account holder will be able to use and which they won’t when selling packaged accounts. They also have to provide an annual statement to keep customers updated on their benefits and whether they remain eligible. Read: Rules tightened on packaged current accounts for more.
But there are also complaints around providers using aggressive selling techniques, signing customers up without permission and failing to cancel the deal when asked.
What’s driving complaints?
The FOS says claims management companies are driving the rise in complaints about packaged accounts.
Around 80% of cases brought to the FOS are from claims managers, trying to cash in on what they probably believe will be the next big mis-selling scandal.
However, the FOS warns packaged current accounts won’t be 'the next PPI', which was widely mis-sold, as many people actually make use of the benefits that come with packaged accounts.
On average just 10% of complaints about packaged current accounts are upheld as in many cases the Ombudsman agrees with the compensation already offered by banks, or are being faced with 'generic' cases pushed through by claims managers that have little chance of succeeding
Getting a better deal
If you think you’re getting a raw deal from your current account, you should ditch it and switch to something better.
Moving only takes seven working days thanks to the Current Account Switch Guarantee and your new provider will take care of transferring all your standing orders and direct debits for you.
Packaged current accounts usually cost between £10 and £25 a month but there are plenty of current accounts that will offer benefits you don’t have to pay a monthly fee for.
The Nationwide FlexDirect Account, for example, pays 5% on balances up to £2,500 for the first 12 months and offers a 12-month fee free overdraft, when you pay in £1,000 a month.
The TSB Classic Plus Account also pays 5% on balances but only up to £2,000. However, this rate is ongoing, so your money will be able to benefit for longer.
Halifax is offering a £100 bonus to those that switch to any of its current accounts. The Reward Current Account pays a £5 bonus each month when you deposit £750, stay in credit and have two direct debits going out each month.
How to complain to the FOS
If you have a complaint about a financial firm you should first take it up with them.
However, if you are not happy with the response you can take it further with the Financial Ombudsman Service.
Read How to complain to the Financial Ombudsman Service for more.
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