Packaged bank accounts
With a packaged bank account, you pay a monthly fee in exchange for perks like travel insurance, mobile insurance and breakdown cover. But are these deals all they’re cracked up to be? Read our guide to packaged bank accounts.
What are packaged bank accounts?
Packaged accounts are basically current accounts that come with extras. Often, they can include benefits like travel insurance, mobile and gadget insurance, and UK breakdown cover. They may also include more favourable rates for loans, overdrafts and credit cards, or other perks like free ATM withdrawals abroad.
Of course, it’s rare you get something for nothing. In this case, to enjoy the benefits of these packaged accounts you’ll have to pay a monthly fee, typically in the realm of £15-£20.
You can also find joint packaged accounts, and these can end up being a great deal, as they’re often covered by the same monthly fee. That means that a couple can both take advantage of any perks.
Packaged bank accounts do have a bit of a bad rep, thanks to a scandal some years back when it emerged that – in some cases – they had been mis-sold to customers. In light of that, it’s wise to go in with your eyes open, read the small print and make sure it’s really a good deal for you before you commit to opening a packaged account.
Is it worth getting a packaged bank account?
It depends on a few things:
- do you need the extras included?
- could find any insurance included cheaper elsewhere?
- does the insurance offer the cover you need?
There’s no point in doubling up on cover or buying cover you don’t need. You may already have mobile insurance included in your home insurance, for example, or you may not be intending to travel so won’t use travel insurance.
If you’re already paying for insurance, or the packaged account offers you cover you don’t need, you’ll probably be better off with a free current account.
But, if you’re in the market for the extras offered by these packaged bank accounts, you could save by getting them for a single monthly fee. To work out if it makes sense for you, multiply the monthly banking fee by 12 to find the annual fee. Then, we can help you compare deals on the extras offered, like travel insurance or breakdown cover. Add up the costs of buying the insurance separately and you can see if you’d save by choosing a packaged bank account instead.
Also, make sure to find out if the account offers an interest-free overdraft, so you can see if the account fee is more than the charges you’re currently paying.
Packaged bank accounts can be a great deal for some, but you need to do your research to see if one would work for you. Another thing to bear in mind is that, if you earn a large salary, you might be better off with a premium account. They generally offer some of the same perks as packaged accounts but without the monthly fee.
What should I look out for when comparing packaged accounts?
It’s tempting to think of any insurance policies included in packaged accounts as perks and skim over the details, but you should always check what’s included in the policies and read the small print before you commit to any deal. Banks have come under fire in the past for selling accounts by offering benefits they know full well you won’t be able to use.
Take travel insurance, for example. Does the policy offered with the packaged account include any covid cover? Or (looking forward to better days), does it cover things like worldwide travel and winter sports? Older travellers will also need to check they’re covered, as standard travel insurance policies normally have age restrictions in place. And, as always with travel insurance, you’ll need to declare certain medical conditions, which could mean you’re not eligible for the policy.
For any mobile phone insurance included, check how many gadgets are covered and if there is any limit on how many times you can claim. And for both mobile insurance and travel insurance, check how much excess you’ll have to pay towards a claim. In terms of breakdown cover, many packaged accounts will offer unlimited cover, but it’s always best to check.
How much do they cost?
The monthly fee you’ll pay for your packaged account can start from as little as £5 for a basic version, to around £20 for something with more frills.
These accounts do offer different perks though, and that’s reflected in the monthly price tag. For example, a more basic account might offer extra interest on your money and free ATM withdrawals abroad, whereas a more expensive package might get you mobile, travel and breakdown cover.
Because all these accounts offer different perks at different monthly fees, it’s a good idea to shop around to find the deal that’s best for you.
What should you do if you were mis-sold a packaged account?
When banks are including insurance benefits in packaged accounts, they have a responsibility to make sure you’re eligible to claim under that policy and to see if it’s suitable for you. They should also keep you up to date with annual eligibility statements so that you can check you’re still getting everything you paid for.
If you think you were mis-sold a packaged account in the past, then you may be able to claim compensation. You may have been mis-sold if:
- you were signed up without your permission
- whoever sold you the account didn’t tell you about free current account options as well
- the bank was aware that you wouldn’t be eligible for certain benefits and they didn’t tell you
- you were told that you would need the account to get a loan or mortgage
- you were told that getting the account would improve your credit score
- your bank didn’t inform you that you had to activate any of the benefits and you were unable to make a claim
If this applies to you, the first step is making a complaint to the bank, either over the phone, in person or in writing. Ask them to refund the fees and switch you over to a free current account. If you disagree with your decision or they don’t get back to you within eight weeks, you can pass it over to the trusty Financial Ombudsman Service.
For more information, read our guide to claiming back bank charges.
Frequently asked questions
Will the bank check my credit score when apply for packaged account?
If the packaged account has an overdraft included, then they will carry out a hard search on your credit file when you apply for the account. This could affect your credit score and other lenders will be able to see it on your credit history.
Read our guide to building your credit score.
Are packaged accounts the same as premium accounts?
If you earn a high salary, a premium account may be a better option for you than a packaged account. They offer many of the same perks of packaged bank accounts but with no monthly fee, but you’ll need to hit a certain salary bracket to apply.
Can I get a joint packaged account?
Yes, many banks offer joint packaged accounts too, and often for the same monthly fee than if you opened one on your own. You’ll both get access to all the benefits, so it’s normally better value to double up – but remember that opening a bank account together is a big commitment!
Compare joint accounts.
The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.