Consumers with packaged bank accounts are being advised to carefully consider how much they pay for the benefits they receive after another major provider raises its fees.
Users are being urged to make sure they are getting the best deal after Nationwide, the most recent well-known company, announced that it was raising prices, in this case by nearly 40%. In addition to charging a monthly fee, these accounts typically offer several perks like discounts, coupons, breakdown assistance, travel insurance, and mobile phone coverage.
In the past, they have generated controversy due to claims that they are not worth the money and that certain banks may have been misselling them.
The most recent expense increase by providers is Nationwide’s increase in the monthly fee for its FlexPlus current account, which went from £13 to £18.
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. 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,” he said.
So how can consumers ensure they are getting the best value for their monthly fee?
What are they?
These current accounts offer several advantages and have monthly fees ranging from around £10 to £45. For instance, Halifax’s Ultimate Reward (£19 a month) offers home emergency coverage, international family travel insurance, and other features, while Virgin Money’s Club M (£12.50 a month) includes UK breakdown coverage as well as worldwide family mobile and gadget insurance.
One of the most advertised products on the market was Nationwide’s FlexPlus, which consumer advocacy group Which? named a best-buy. However, the building society recently declared that the monthly fee would rise to £18 starting December 1. The increasing insurance cost is cited, but the number of account holders is not disclosed.
Numerous other options are available. While NatWest offers several options, such as Reward Platinum for £22 per month and Lloyds Platinum for £22 per month, among many others, the Co-op Bank’s Everyday Extra costs £15 per month.
App-only providers also offer customers options, with plans ranging from Monzo’s Max, which starts at £17 per month, to Revolut’s Ultra, which costs £45 per month and offers a plethora of benefits like unlimited access to airport lounges and excess insurance for car rentals.
According to a Fairer Finance analysis, Royal Bank of Scotland, Halifax, Lloyds, and NatWest have all raised their fees in recent months.
Balancing the benefits
To determine if a packaged account is suitable for you, it’s important to do some research. Start by assessing the annual cost of the account. Once you know that, you can evaluate whether the included features, such as insurance or breakdown assistance, are truly valuable for your needs.
This entails carefully considering whether you will take full advantage of these benefits or if you could, for instance, opt out of the packaged account and obtain a more affordable insurance policy that meets your needs. Even though you don’t own a car, it might provide breakdown assistance insurance.
“Look at the overall value, not just the fee. Compare the cost of buying the insurance and other benefits separately, versus the fee,” Daley said.
Additionally, consider if some of the benefits are already covered by other sources, such as your current home insurance policy that covers your cell phone.
Policies that come with packaged accounts may also have exclusions and restrictions on their coverage.
According to Damien Fahy of the Money to the Masses website, owners of these accounts ought to periodically assess their cost-effectiveness.
“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?” Damien Fahy said.
Joint account holders can frequently benefit both parties for a single fee, but that shouldn’t deter them from calculating the costs and determining whether the features are worth it. According to Fairer Finance, the Nationwide FlexPlus offer is still a great deal despite the cost increase.
Fahy notes that the Halifax Ultimate Reward account, which offers travel insurance, AA breakdown, and home emergency coverage, may be especially appealing to homeowners.
If things go wrong
These accounts have been frequently discussed as “the new PPI” for some years now because of issues with purported mis-selling. You might be eligible to recover a portion of the costs if you think you were misled about a packaged account.
If you discovered you were not eligible for some of the insurance plans being offered, or if you were told you had to close the account, it might have been mis-selling. Another possibility is that you were informed that having an account would raise your credit score, or you attempted to cancel but were unsuccessful.
The first step is to complain to your bank. A free online resource is available on Martin Lewis’s MoneySavingExpert website. If the bank dismisses your complaint, you may take it to the Financial Ombudsman Service.
According to Daley, there is more protection because of the recently enacted consumer duty, which outlines how businesses and financial institutions should treat customers.
“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,” Daley concluded.