Packaged current account fees on the rise

There are a number of different bank account types available these days depending on your needs and circumstances.

The basic bank account is often made available to those that are working in this country but are not official residents, as well as to those with poor credit who cannot get a standard current account.

The current account is the most popular type of bank account, with most consumers using this sort of account to receive their salaries and conduct their day to day banking and financial transactions, such as paying bills, setting up direct debits, and withdrawing cash/paying for purchases by debit card.

Another type of account is known as the packaged current account, and this offers all of the facilities of a standard current account. However, it also offers an additional facility in the form of a range of benefits.

Whilst the benefits can vary from one provider to another, they usually include breakdown cover for your vehicle, travel insurance cover, preferential rates on borrowing, extended warranties, discounts on certain items or from specified retailers, enhanced security benefits, and more.

However, these benefits do not come for free. In order to have a packaged current account you need to pay a monthly fee and this can vary from one bank to another. The average monthly fee is round £12 to £15 but it can be a little less or far more than this.

According to a recent report these packaged account fees are now on the rise, and consumers that have these accounts could soon find that the monthly account fee has gone up.

The report showed that the NatWest, Lloyds TSB, and the Royal Bank of Scotland have already hiked up the rates on their packaged current accounts, and have contacted nearly seven millions customers with these accounts to advise them of the hike.

Why have the fees on these accounts gone up? Well, the general consensus from industry officials that have been speculating on the matter is that banks are preparing themselves for a cut in profits as a result of the High Court test case in which the judge ruled in favour of the Office of Fair Trading.

If the OFT cuts bank charges for unauthorised overdraft use then the banks stand to lose a fair amount of money, and like credit card providers will look at other ways of recouping costs.

Many think that the hike in packaged account fees is the first step for many banks, as many are expected to also introduce account fees for standard current accounts in the event that they are forced to cut their penalty charges.

In the meantime consumers that do have packaged current accounts are being urged to remain vigilant, as their account fees could soon by on the up. Industry professionals have also urged consumers to ensure that they are getting value for money from their packaged current account based on the number of benefits that they use and how much these benefits would cost them if they were to purchase them individually.

For example, if you have a packaged current account that charges £15 per month then you will be paying a total of £180 over the course of the year. If you tend to use practically every benefit that is on offer from the bank then there is a chance that this could prove to be value for money.

However, if you only use the vehicle breakdown cover and none of the other benefits are of any real use to you then you need to look at whether there is any point in having a packaged current account. With vehicle breakdown cover available from most insurance firms and direct from breakdown recovery firms for under £100 you could be wasting in excess of £80 a year.

Of course the banks have got answers when it comes to why they have hiked up their packaged current account fees.

Lloyds TSB stated: ‘Customers told us they would value additional benefits, and to cover the cost of these we have increased the cost of the Gold and Platinum accounts.’

The NatWest said: ‘The packaged accounts offer our best-ever potential savings for customers with the addition of new features, and this has been reflected in modest price rises.’

Some industry officials have suggested that consumers could make big savings by simply switching to one of the best buy current accounts and doing away with the packaged current account.

One official said: ‘The savings you make will more than likely pay the cost of buying some benefits independently. These benefits can be quite attractive but only if you take full advantage of them, so make sure you register for them and make sure they fully meet your needs. How beneficial is car breakdown cover if it only covers you on a limited distance from your home? Alternatively, how often do you lose your mobile phone?’