How to compare packaged bank accounts
What is a packaged current account?
Also known as a current account "with benefits", a packaged current account comes with extra products alongside the banking facilities, and it'll charge a monthly fee. The most common benefits are mobile and travel insurance, and breakdown cover; some accounts also include features like card or ID protection, home emergency cover, and preferential rates for other products from that bank or its partners.
Packaged accounts need to be considered carefully: the value of these extra features and products isn't always immediately obvious, and the details of similar sounding benefits will vary from bank to bank - and, where a bank offers more than one packaged deal, from account to account. What's more, many people will already have access to similar benefits through their home insurance or credit card.
How do I get a current account with benefits?
As with the current accounts that pay interest, customers will need to meet various conditions to continue to be eligible for their benefits. The most obvious condition of having a packaged account is the monthly fee, on top of which we'll also be expected to set up minimum payments in and out of the account each month.
Because these are considered "premium" accounts, applicants will need to be confident about their credit history. It is possible that someone with a spotless credit record may be turned down for a packaged account, as the banks are obliged to check that we're eligible for those extras: the travel insurance on offer is often only available to people aged under 70, for example, or it may be that the insurance company won't cover someone with a particular pre-existing condition.
When is a packaged account a good deal?
Packaged accounts are a good deal when they offer us something we'd have to buy separately for less than we'd otherwise have to pay. The easiest way to work this out is to calculate the yearly cost of having the account, then compare that with the combined cost of the features we know we'd use if we were to buy them ourselves.
This is when it pays to look into the details of the products on offer, particularly if we're interested in the travel insurance or breakdown cover offered. As well as checking basic eligibility, look at what exactly is included in that cover. The travel insurance on offer is usually fairly comprehensive, but while many policies include winter sports, some don't; the breakdown cover available varies considerably, and sometimes comes with a limit on callouts per year.
Packaged accounts can also make a lot of sense when they're being opened as a joint account. The conditions and cost of having the account will remain the same, but the packaged benefits will be available to both named account holders. This is particularly useful for boosting the breakdown and mobile phone cover available, for example: it'll be doubled for no extra cost.
When should I avoid a packaged account?
Current accounts with packaged benefits appeal because they sound like incredibly good value. When the products suit us, they are – but if we don't need one or more of those features, it's increasingly unlikely that they'll be worth the monthly fee. Identity theft protection, for example, doesn't cover the cost of our cards being used fraudulently – which is covered free of charge by most card providers themselves.
Packaged accounts also aren't the best option for people who find themselves overdrawn regularly; the interest and fees associated with going into the red will have the effect of making those "free" products much more expensive. That said, because they're premium products, some packaged accounts include more generous terms on overdrafts: look for references to an overdraft buffer or fee-free overdraft to see how the packaged account compares with a standard account – but be aware that these kind of perks are often only available to those with a perfect credit record. To compare current accounts with an overdraft see this table.
Are the benefits automatic?
Some of the benefits included with these current accounts will need to be activated before we can use them. This is often the case with the mobile phone insurance, for example, and anyone who has a pre-existing health condition will need to make those plain when they apply for the account - even if they're only having tests - or the travel insurance could be invalidated.
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