Do packaged bank accounts deliver value for money? | Money

Consumers with packaged bank accounts are being urged to scrutinise how much they pay for the benefits they receive after another leading provider increased its fees.

Nationwide has become the latest big name to announce it was upping the cost, in this case by almost 40% – prompting calls for users to ensure they are getting the best value for their money.

These accounts charge a monthly fee, and usually include a set of benefits such as travel insurance, mobile phone cover, breakdown assistance, discounts and vouchers.

They have been controversial in the past because of suggestions that they are poor value, and that some banks may have been mis-selling them.

Nationwide’s fee increase for its FlexPlus current account, from £13 to £18 a month, is the latest move by providers to raise costs.

James Daley, founder of consumer group Fairer Finance, says the quality of packaged accounts varies, and warns they need to be scrutinised. “They can offer great value if you use all the benefits. But they can also be a colossal waste of money if you don’t,” he says. “Some of the recent price rises will be diluting the value even further for those who are not making full use of all the perks.”

So how can consumers ensure they are getting the best value for their monthly fee?

What are they?

These current accounts charge a monthly fee from about £10 up to £45, and include a range of benefits. For example, Virgin Money’s Club M (£12.50 a month) comes with UK breakdown cover and worldwide family mobile and gadget insurance, among others, while Halifax’s Ultimate Reward (£19 a month) has home emergency cover, worldwide family travel insurance and other features.

Nationwide’s FlexPlus was one of the most frequently highlighted on the market – it was recommended as a best-buy by consumer group Which? – but the building society recently announced the fee would increase to £18 a month from 1 December. It blames the rising cost of insurance, but declines to say how many people hold the accounts.

There are many other options to choose from. The Co-op Bank’s Everyday Extra costs £15 a month, while NatWest has various choices including Reward Platinum for £22 a month, and Lloyds Platinum is £22.50, among many others.

App-only operators also offer choice, with Monzo’s Max from £17 a month, right up to Revolut’s Ultra, which comes in at £45 a month with a long list of perks, from unlimited airport lounge access to car hire excess insurance.

Analysis by Fairer Finance shows Lloyds, Halifax, NatWest and Royal Bank of Scotland have all increased their fees over the last few months.

Balancing the benefits

Fully understanding whether a particular packaged account is right for you takes a little bit of work. First, you need to work out the yearly cost, and then see whether all of the features – such as insurance or breakdown assistance – are really worth it for you.

This means thinking long and hard about whether you will use these benefits to your full advantage, or whether you could, for example, get a cheaper insurance policy that fits your needs outside the packaged account. Maybe it is offering breakdown assistance insurance but you don’t have a car.

“Look at the overall value, not just the fee. Compare the cost of buying the insurance and other benefits separately, versus the fee,” says Daley.

You should also think about whether some of the benefits are already available via other sources – such as your existing home insurance covering your mobile phone.

Policies provided with packaged accounts can also have limitations and exclusions in what they cover.

Damien Fahy of the Money to the Masses website says holders of these accounts should run a regular check on whether they are cost effective.

“You should also review any restrictions or conditions attached to the perks, such as limits on medical coverage or age exclusions on travel insurance,” he says, adding that this is particularly important if you have a pre-existing condition.

“Travel insurance included will usually exclude existing medical conditions, unless approved by the insurer, and, even then, you may have to pay an additional premium. For most people with pre-existing conditions, it’s best to shop around and it is usually cheaper to use a specialist travel insurer.

“Also, always check who can use the account benefits. Is it just the account holder that’s covered, or your entire family?”

Joint account holders can often get the benefits for both parties with just one individual fee, though that should not stop them from doing the sums and seeing if the features are cost effective.

Fairer Finance says that even with the increase in cost, the Nationwide FlexPlus deal is still very good value.

Meanwhile, Fahy points to the Halifax Ultimate Reward account as one which could be particularly attractive to homeowners, as it has home emergency cover, plus travel insurance and AA breakdown.

If things go wrong

It is now several years since these accounts were being regularly talked about as “the new PPI” due to problems relating to alleged mis-selling.

If you believe you have been mis-sold a packaged account, you may be able to reclaim some of the fees.

It could potentially have been mis-selling if you were told you had to take out the account, or you later found you were ineligible for some of the insurances being offered. It may also have been that you tried to cancel it but were unable to do so, or were told having an account could improve your credit score.

The first step is to complain to your bank. Martin Lewis’s MoneySavingExpert website has a free online tool to help. If the bank rejects your complaint, you can go to the Financial Ombudsman Service.

Daley says the recently introduced consumer duty – which sets out how consumers should be treated by companies and financial institutions – gives additional protection.

“Given these new regulations, it’s no longer OK for banks to sit back and let their customers get poor value from these products.

“They need to be making sure that customers are using the benefits – and if they’re not, they should be ready to downgrade them to cheaper, lower-frills alternatives,” he says.