A beginner’s guide to packaged bank accounts

Packaged bank accounts give you certain extra benefits on top of what you might normally expect to get with a current account, but you will usually have to pay extra in return – so is it worth the monthly fee to get one of these accounts?

Well, as is often the case, it’s a balancing act between how much you have to pay to get and keep the benefits on any one account, and how much they are actually worth, not just on paper, but in practical terms to you.

Here we will look at what kind of extras you can sometimes get on a packaged bank account, and how likely you are to benefit directly from having them.

What you get with a packaged bank account

A packaged bank account might have another name, depending on how your bank have decided to market it.

In some cases they might call it a premium account and promote the extras as free perks, even though you will typically have to pay a monthly fee for them; in other cases it might be referred to as a reward account, again as though these extras you pay your monthly fee for are a kind of free bonus.

Just as the name can vary, so can the exact terms of the account, but it will usually involve extra products that apply to certain items and pastimes that are only loosely related to the account.

These may include:

  • Car breakdown cover
  • Mobile phone insurance
  • ID fraud protection
  • Travel insurance
  • Better interest rates
  • No-commission foreign currency

You might notice that these are mostly things that you can buy separately very cheaply, for example a gadgets insurance policy will likely cover your phone and other electronics too, and can cost from just a few pounds per month.

Importantly, many of them are the kinds of products and protection that you might already have elsewhere – such as cover for your phone on your home contents and breakdown cover on your existing car insurance policy.

A note about ID fraud protection

If you are given ID fraud protection as a bundled extra, read the terms and conditions very carefully. In general the banks already protect you against ID fraud that isn’t your fault, and an extra policy might do little to increase that protection.

Sometimes ID fraud services might include an option like registering all of your payment cards so that if you lose your purse or wallet, you call one single telephone number and they take care of cancelling all of your cards.

But again, how much of a benefit you really get from this kind of insurance product can be a very personal thing, and many people don’t really gain much extra safety or security at all.

Comparing bundled insurance

It’s not just about whether the monthly fee covers the cost of the added extras – if you were to buy them separately, you would probably look at several insurance policies and read the terms and conditions carefully before committing, so why would you let your bank dictate a single set of terms in this case?

When you look more closely, you might find that the level of cover you get with a bundled policy is pretty basic, and that you could actually get more value – and more protection overall – by arranging your own policy elsewhere.

On some accounts, you don’t even automatically get the extras until you individually request and activate them, which could leave you paying a monthly fee for features that aren’t even active.

Put on a packaged account by your bank?

Packaged bank accounts are not right for everyone – it really does depend on whether you will use a good number of the perks and benefits you get in exchange for the monthly fee – so your bank should not put you on one of these deals without your express permission first.

In some cases you might be moved to a premium account where there is no monthly fee, but where getting the extra benefits relies on you paying a minimum amount into the account each month or having your salary paid in.

With no direct cost to you upfront, you bank may be more likely to ‘upgrade’ you to this kind of account without asking for your permission – and it’s often very difficult to revert back to a normal current account once they do.

If you are moved without asking your permission AND you are charged a monthly fee, consider making a formal complaint, as you have effectively been sold a premium service you did not ask for or want.