Don't be duped by these rip-off current accounts!

Do you get suspicious when a bank offers you a 'fantastic package of benefits' to spice up a bog-standard current account?

According to Defaqto, the cost 'packaged' or 'added value' current accounts is on the rise, with the average monthly fees up from £10 in April 2006 to £13.87 today.

The number of packaged current accounts available is also on the increase, with 53 now on the market, compared to 31 back in 2006. But banks are there to make money after all, so how much are the perks associated with these accounts really worth?

At lovemoney.com, we've always thought packaged accounts are something of a false economy. On the other hand, those in favour of them often highlight the convenience of having all sorts of benefits and  insurance policies sorted out for you.

So, what are the pitfalls? Here are three common benefits that packaged accounts offer, and why I think they're not worth it.

Mobile phone/gadget insurance...

These days, almost everyone has a mobile phone, so you may think insurance should be one of your top priorities. However, unless you happen to own a flashy new model, the reality is, many phones are worth less than the annual cost of covering them.

You also have to remember that if you make a claim, you'll have to fork out an excess fee somewhere in the region of £30- £50, and common problems like wear and tear won't be covered under your policy.

Besides, a good home insurance policy with personal possessions cover should protect you if anything goes wrong, so make sure you're not over-insuring yourself.

That's why, here at lovemoney.com, we think Mobile phone insurance is a rip-off!

Annual travel insurance...

As a student, I used to work part-time in a high street bank. And I noticed that one of the most enticing features of packaged accounts to customers was the annual travel insurance.

But according to our travel insurance search engine, a 40 year-old can buy annual travel insurance for around £17, while worldwide cover starts from £25. This is far less than the money you'll fork out in premiums.

There is, however, one circumstance where getting a packaged account may potentially be worth it. As you get older, insurance gets more expensive - and travel insurance is no exception.

So, if you fancy yourself as bit of a Phileas Fogg, but aren't exactly a spring chicken, it may be worth looking into.

Both the HSBC and NatWest packaged accounts offer insurance to everyone under 70, while the Alliance and Leicester Premier 50 account will cover you until you're 79.

Topping all these is the Lloyds TSB account, which covers you until you reach 80. So for older travellers, where travel insurance quotes can tip over the £100 mark, this packaged current account may be worth considering.

However, with all these accounts costing at least £10 a month, you'd have to want to take advantage of at least one of the other benefits to really make it worth your while.

Besides, if you plan to stick to Europe, you don't need to pay anything at all to get annual travel insurance.  You'll get this cover free when you take out the Alliance and Leicester Premier Account. There are absolutely no monthly fees attached to this account, although you do need to fund it with £500 a month.

And, as an added bonus, A&L has started giving away £100 in cash to new customers who take out this account! Watch our Love It or Loathe It? video to find out more.

Cheaper overdraft rates

Many packaged accounts entice you with cheaper overdraft rates than standard accounts, and if you are someone who slips in the red, you could find yourself the target of the friendly lady behind the banking counter.

But if you only slip slightly into your overdraft each month, many accounts now offer fee-free buffers.

For example, Coventry Building Society and First Direct will give you a £250 interest free overdraft, while the Co-Operative bank offers £200.

All these accounts are fee-free, provided you meet a minimum income requirement. First Direct's is steepest, and you'll have to pay in at least £1,500 a month - around £23,500 as an annual salary (before any student loan deductions), to qualify.

Even better are the range of current accounts from Santander. Both Abbey and A&L offer interest free overdrafts for a year if you switch to one of their current accounts.

Alliance and Leicester offers up to £2,000, while Abbey will give you an overdraft of up to £5,000 provided you pass a credit check. Just bear in mind you're not allowed to take advantage of one offer if you already bank with the other.

When it comes to packaged accounts, convenience might be the name of the game, but it also has its price. So add up how much your benefits are really worth to you. It will make you think twice before signing on the dotted line.

Find a cheaper current account today!

More: Mobile phone insurance is a rip-off! | Remember this essential holiday item