Are packaged bank accounts worth it?

Are packaged bank accounts worth the money? According to the latest research, one in five of us now has a packaged bank account. These are accounts where you pay a monthly fee and in return receive a range of benefits.

Monthly fees range from about £15 to £25 and offer services such as mobile insurance, travel insurance, preferential exchange rates and so on.

But are they any good? Well the Financial Services Authority (FSA) has decided to take a look, particularly at the insurance benefits attached to these accounts, which ought to give anyone thinking of taking one out food for thought, but Your Money is happy to add its own hints and ideas on how to make sure that a packaged account is right for you.

The most obvious question to ask yourself before signing up to one of these accounts is, ‘will I use the services I am paying for?’ Depending on whose research you believe, only between 10% and 30% of those with packaged accounts actually take advantage of what is available.

As a simple example, free travel insurance is a lovely thing to have, but if the extent of your journeys is a week in Hunstanton in August then it is probably not worth it. It is obviously a similar story with other travel-related perks.

Question number two should be, ‘do I already have these benefits elsewhere?’ Mobile phone insurance, often one of the main selling points of packaged accounts, is already included in many of our home insurance packages, so in effect you are paying twice for the same service.

It can be the same story with other benefits, too, such as breakdown cover and ID theft. Banks are obliged to refund money taken from your account anyway, provided you have taken reasonable care, so generally that benefit will not be relevant.

Assuming you are sure that you will use the services, and that you have not got them elsewhere, the next question to ask yourself is, ‘can I get it cheaper somewhere else?’ Having preferential currency exchange rates is fine, but check just how preferential they actually are. They may well be cheaper than the bank’s standard rates but can you find a better rate on the high street?

Savings accounts, credit cards, loans mortgages are also often dangled with the carrot of a discount, but again shopping around can often find you a better deal.

And check the small print. Some mobile phone insurances are only valid if you register the phone with the bank at the time you take out the package. What do your terms and conditions say?

Bank statements should always be read carefully anyway, but be aware that there have been reports of banks automatically upgrading customers to new packaged accounts without their say so. If an unexplained £15 appears in your account, it will be worth finding out why it is there.

Once you have signed up to a packaged account, do not assume that it will always be right for you. As your circumstances change, so might your needs, so make sure you keep an eye out for any new packages that might better meet your current situation.

All this is not to say that all packaged accounts are bad. Far from it. For some people, they unquestionably offer a cost effective and time saving way to get hold of things they need and use everyday. But before you take one out, just be sure that you will take advantage what is on offer and that the package of benefits meets your needs. If not, you could be throwing away up to £300 a year.