TOOL | Top Packaged Bank Account Analyser
A packaged bank account is a great way to get mobile phone, travel, breakdown and other insurance cheaply IF YOU�LL USE IT. If not, it can be a massive waste of money.
This is the first incarnation of this guide. Please tell us whether it works for you, your experiences with any of these accounts, and if there are any we've missed.
Are premium accounts worth it for me?
Banks make money from these accounts - they want you to have them. But this doesn't mean that they're a waste of money for all - quite the opposite.
For those who are savvy enough to check policies and work out costs, they can SAVE you money. There's a simple way to work it out:
If you don't need the added extras, or can insure cheaper elsewhere, don't bother with a packaged account.
Start by multiplying the monthly cost by 12 - for example, �25/month is �300/year - then see if you can buy the 'freebies' for less. If you can, either ditch and switch to a fee-free account or shift for better value.
Packaged accounts DOs & DON'Ts
DO MAKE SURE sure you can't buy cheaper
Travel insurance, smartphone cover and a breakdown policy for a seemingly low monthly fee. It really does sound like an amazing deal - and that's exactly want you're meant to think.
Now multiply this payment by 12 - it could be costing up to �300/year. Next, check what you could get insuring separately - see the Travel Insurance, Breakdown Cover and Mobile Insurance guides to help. The policies included with packaged accounts are deliberately high-end, so compare whether a decent, standard policy covers what you'll need.
If you're saving, these might be worth it for you. If you're not, ditch and switch.
DON'T let salespeople 'upsell' you
Banks want you to pay for these accounts and often fail to explain whether you're eligible for the insurance policies, which has led to many being mis-sold (if you think this is you, there's full reclaiming help here).
Staff are incentivised to sell, and are driven to upgrade people without necessarily thinking what's right for them. They don't care if you won't use the extras, although the FCA has introduced new rules to change this (see below).
DO you need a joint account?
If you're after a joint account (for you and a partner, or a friend), then packaged accounts can start to shine. With most, the perks are valid for all account holders. Open it jointly and you'll both be covered, for the same fee, effectively boosting the account's value.
However it's worth mentioning that some of these accounts will cover you and your partner (someone living at the same address for more than six months) anyway.
If you have a joint account, it'll cover you and your partner,
doubling the value.
You should still consider what policies you actually need, and whether you could get them cheaper elsewhere, but if you both travel worldwide, own cars and have smartphones, a packaged account could save you money. Check out the top picks below, all of which allow joint accounts for the same single fee.
DON'T forget to activate your policies
Sneakily, some firms require you take action after opening the account to activate the policies you've been sold, particularly mobile insurance and breakdown cover. You could be paying and not even be covered.
Fail to register and you could find your family, phone or car aren't covered when you need them to be. Read a full breakdown of which banks require you to activate which policies.
DO check policy limits
In late 2011, packaged accounts were targeted by the Financial Services Authority (the regulator's now the Financial Conduct Authority), as an example of banks selling unsuitable products to consumers.
The most important thing is that you ask the right questions when signing up for an account. Check all insurance policies cover you for everything you need. If they aren't going to pay out when necessary, they're worthless.
The new rules, which came into force on 31 March 2013, should help. But if you already have a packaged bank account, you may be able to reclaim money if it was mis-sold to you - see below and our step-by-step guide for help.
DON'T assume they'll improve your credit rating
Banks use the same credit scoring procedures, where they assess whether they want you as a customer, for normal accounts as they do with packaged accounts. This check mainly looks at your overdraft and whether you use it and keep up payments. This information is refreshed every month and used by financial institutions.
Whether or not you'll be accepted for a packaged account is at the bank's discretion. But these accounts can be big winners for them. The more people that can get them, the better it works out so the banks could decide to grant them to different customers.
DO make sure everything you need is covered
Don't be caught out with heavy charges. If winter sports and family cover aren't included in your travel policy, upgrading can cost as much as �72.
Add that to the annual cost of your account and you could find you're spending far more than you need to.
Instead, either choose a more suitable account to begin with, or save by insuring separately.
DON'T need extras? Bag �100 bonus
If you don't need the extras, or you're currently paying interest for using your overdraft in your current account, ignore packaged accounts and grab one of the overall Best Bank Accounts.
For those in the black, First Direct* pays a �100 bonus, if you have a monthly income of �1,000. Alternatively, Halifax* will give you �5/month plus a �100 bonus. See the fee-free Bank Accounts guide for full options, but if you're struggling to get a normal account, see the Basic Bank Accounts guide.
DO declare any pre-existing medical conditions
Failing to declare conditions when applying for the account - and therefore, the travel insurance cover, too - may invalidate the policy. You need to call the insurer and tell it, even if you're just having tests.
If you're diagnosed or anything changes after the policy has been taken out, do this before you travel. They'll then decide if they'll still cover you, with or without an additional charge. This will be reviewed annually, for as long as you hold the account, although they may not provide cover under the same conditions each year.
Watch out for good junk mail
This is one of the few areas where junk mail can be positive. Very occasionally direct mail offers, targeted website offers or sign-up stalls in shopping centres offer better deals. Keep your eyes open, but ensure you ask about any fees.
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Best buys: Packaged bank accounts
Many top bank accounts you can get free, but some monthly-fee accounts can be worth it IF you use the products bundled with them - usually breakdown cover, travel insurance and mobile phone insurance. More importantly, if they save you money, they're a definite winner.
Our top picks
- In-credit interest: None
- Min monthly income: �750 (explanation)
A great way to get completely free European travel insurance is Nationwide's* FlexAccount. It's a decent policy too, and provides cover up to age 75 (max age 73 at account opening), which alone usually costs a fortune. Plus if you need to upgrade to worldwide, it's just �20 - the cheapest standalone policy costs from �27.
You must switch and pay in �750+/mth to qualify. If you have a pre-existing condition, tell Nationwide as you may need a medical before getting cover and could be charged.
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Upgrades are very reasonably priced. At �20/year for worldwide cover, �30 for family and �40 for winter sports, they can be cheaper then some top value policies, even if you need all three - see Cheap Travel Insurance. See the Key Facts PDF and Policy Wording PDF for full policy details.
If you're accepted, you'll also be eligible for the Nationwide Select credit card. It gives 0.5% cashback, 20 months 0% on balance transfers, cheap overseas spending and 0% on purchases for 12 months. See Cashback Cards for more details.
Customer service feedback
In our February 2013 poll of the nine big banks, 67% voted Nationwide great, 28% OK, while 5% voted it poor.
- In-credit interest: 3% AER up to �2,500
- Min monthly income: None
- above that
For the cheapest worldwide family travel insurance up to age 74 (which usually costs double the account charges alone), smartphone insurance for all the family at the same address and UK & Europe breakdown cover, Nationwide's* FlexPlus account is a cracking deal for �120/year - IF you'll use the features.
Plus it comes with extended warranty cover for an additional 12 months on all new household electrical items between �50-�2,000. You'll also get 3% AER in-credit interest on balances up to �2,500, beating top savings accounts.
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Worldwide family travel insurance: Allows multiple trips worldwide and includes winter sports, business, golf and wedding cover. The cheapest you could normally get this for is �50, but for a top value policy like this you could pay over �130 per year (read the full Travel Insurance guide).
Cover is up to age 74, but those over 75 can be covered for a �50 premium. It'll cover you, children under 19 (or 22 if in full-time education) providing they live at the same address, and your partner, even if it's not a joint account.
The excess (the amount you pay towards the claim) is a maximum of �50. If you have a pre-existing condition, tell Nationwide as you may need a medical before getting cover and could be charged.
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Mobile phone insurance: Covers repair or replacement after theft, loss or damage, insuring each handset up the to value of �1,000, so it'll cover all smartphones. The excess is a maximum of �100 for an iPhone.
Unusually, it covers the phones of all family members, provided they live with you - so maxed out, this gives serious value. See Mobile Insurance for more details. -
Britannia breakdown cover: For the UK and Europe including home assistance. Cover is for the person, and people travelling in your vehicle. On a joint account both account holders would be covered.
For more policy details, see the travel insurance, mobile insurance, and UK & Europe breakdown cover documents.
The debit card with the account has no fee or load for cash withdrawals abroad, making it a leading debit card for overseas use, but still has a 2% charge when using it for overseas purchases, so don't use it for this.
For overseas purchases, if you have the FlexPlus account, you're also eligible for the Nationwide Select credit card. It gives 0% load on overseas purchases, as well as 0.5% cashback, 20 months 0% on balance transfers and 0% on purchases for 12 months. See Cashback Cards for more details.
Customer service feedback
In our February 2013 poll of the nine big banks, Nationwide was 3rd, with 67% voting it great, 28% OK, and just 5% voting it poor.
- In-credit interest: 1% AER for over �1k, 2% over �2k, 3% for �3k-�20k
- Min monthly income: �500 ( explanation)
- Cashback: 1% on water, council tax & Santander mortgage, 2% on gas & elec, 3% on phone, internet & TV
The Santander* 123 Current Account operates an entirely different way. There's no insurance, but it pays up to a massive 3% cashback on household bills plus 3% AER in-credit interest on �3,000-�20k - even lower bill-payers could be quids in.
We crunched the numbers on how this stacks up and after the fee, we worked out low users would be up by �47 a year, average users �115 and high bill payers could be �226 in profit.
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- Cashback rates: 1% cashback on water, council tax bills and repayments up to �1,000/mth on Santander mortgages, 2% on gas and electricity, 3% on mobile, home phone, broadband and TV packages.
- In-credit interest: 1% on balances over �1,000, 2% over �2,000 and 3% on the whole amount if you save �3,000 - �20,000. Anything over �20,000 gets no interest. If you get 3%, this beats the current Top Savings Accounts.
- Overdraft costs: Overdraft is 0% APR for 4 months if using Santander's switching service. Then it's �1/day (max 20 days/month) for arranged overdrafts. �5/day for unarranged overdrafts. Max �95 fees/charges in any calendar month.
To get these perks, use its Account Transfer Service to move at least two direct debits and standing orders, and have a monthly income of at least �500. If you can't pay the monthly deposit, you won't earn the cashback in that month. Existing current account holders can switch to this if they wish. Applicants must pass a credit check.
How good is it?
A 'typical' billpayer with a Santander mortgage could make �115 a year profit, before interest. Without the mortgage this drops to �50 (see Santander 123 Analysis for more stats). But bigger spenders can push it further - @KellyAJackson told us via Twitter.:
"I have a 123 account and I'm getting about �18/month back after my fee - it's fantastic. �6 just for paying the mortgage"
Customer service feedback
In our August 2012 poll, 64% voted Santander 123 great, 28% OK, 8% poor.
Great mortgage deals:
Some accounts will offer discounts on mortgage fees or rates with their fee-charging current accounts. Again, ensure you weigh up the saving and make sure you take full advantage of all that's offered. HSBC gives a discount on the fee or rate, saving you around �200 if you take out one of its packaged accounts. Co-op, listed above, also has mortgage offers.
However, it's only worth it if you're already planning on taking out a mortgage with them. If their mortgages work for you, then get the account too. If they don't, don't bother. See our best buys below.
- In-credit interest: none
- Min monthly income: �100k salary ( explanation)
Premier account holders with HSBC can save �300 on mortgage fees wiping the �300 account fee in the first year.
However, it's fee-free if you hold over �50,000 of investments, have a salary of �100k or a mortgage of at least �300k. Plus you'll get worldwide family travel insurance.
If you're not eligible for the fee-free Premier, you may want to consider the Advance account, but check the savings between the two first. The deals aren't as good, but the fee is �12.95/month and you'll still get �200 off fees. It also comes with UK breakdown cover.
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Customer service feedback
In our February 2013 poll, 43% voted HSBC great, 45% OK, 12% poor.
Watch out for good junk mail
This is one of the few areas where junk mail can be positive. Very occasionally direct mail offers, targeted website offers or sign-up stalls in shopping centres offer better deals so keep your eyes open, but ensure you ask about any fees.
Don't miss out on updates to this guide Get MoneySavingExpert's free, spam-free weekly email full of guides & loopholes
Do I need to activate policies?
Many people get caught out after they've signed up to one of these accounts. They wrongly assume that they'll automatically be covered, when in fact some policies require you to register your details to initiate cover. This particularly applies to phone insurance.
Failing to do this is another way packaged accounts can become a monthly black hole for your cash. Check you've done all you need to before embarking on that holiday or long car journey.
Check below whether your bank requires you to register or not.
| Bank | Travel insurance | Breakdown cover | Mobile insurance |
|---|---|---|---|
| Bank of Scotland | ✕ | ✕ | ✕ |
| Barclays | ✕ | ✕ | ✓ |
| Halifax | ✕ | ✕ | ✓ |
| HSBC | ✕ | ✕ | ✕ |
| Lloyds TSB | ✕ | ✕ | ✕ |
| NatWest | ✕ | ✕ | ✓ |
| Nationwide | ✕ | ✕ | ✕ |
| RBS | ✕ | ✕ | ✓ |
Have you been mis-sold?
In July 2012, the FSA (now the FCA) announced new rules to tighten regulate the selling of packaged accounts. In light of the PPI scandal, it's no wonder banks are a little on edge.
Many were sold these accounts even though they were unable to claim on the insurance, something that isn't often discovered until a claim's needed. Travel insurance particularly becomes useless for those over a certain age, usually about 65.
The new rules, which came into force on 31 March 2013, help make the selling of these accounts more transparent. There were already regulations on selling insurance policies, but not when bundled together as part of a bank account.
Banks and building societies must now:
- Check whether the customer is eligible to claim under each policy and share that information with them.
- If the sales adviser is recommending a packaged account, they must establish whether each policy is suitable for the customer and alert them if some are not.
- Provide customers with an annual eligibility statement setting out the requirements for each insurance policy, prompting them to check whether their circumstances have changed and whether the policies continue to meet their needs.
A further consultation will decide whether banks will have to tell account holders when they have reached the age limit for their travel insurance policy, or provide a warning if they will do soon. See the FSA publishes new rules on packaged accounts MSE News story.
Can I reclaim for mis-sold accounts?
Typically, claims are made by people not realising they were paying for their account, those who weren't told of a free alternative or account holders who discover they weren't eligible for the extras. If you believe any of these apply to you, you could have been mis-sold.
See the Packaged account mis-selling victims can claim compensation MSE News story and the Reclaiming Packaged Accounts guide for more info and step-by-step help to guide you through the process.
But for a little inspiration, although success cases are still few and far between, one forumite proves it's not impossible:
Borderlander Wrote to my bank 4 weeks ago as a result of reading your item on mis-sold packaged bank accounts - exactly 4 weeks later and Co-op Bank have just credited my account with �863, the whole amount I had paid since opening the account in 2003. Well done Co-op Bank, well done Martin's Money Tips!
The Financial Ombudsman Service receives about 100 complaints each month about packaged accounts. It's hard to say exactly how many, though, as they are often logged under insurance complaints.
How to reclaim
See the Reclaim Packaged Accounts guide for full help, but here's a quick summary of how to go about it:
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Have you ever claimed on insurance?
Check the policies that you're paying for. If you've ever made a claim under them, then chances are you won't be able to reclaim. If you haven't, didn't know you were paying at all or have discovered you can't claim when you were told you could, you may have been mis-sold. -
Never claimed? Contact your bank
If you think this is you, contact your bank. Write a letter stating why you've been mis-sold, the account you're paying for and how long you've had it - our step-by-step guide includes template letters. If you were paying unknowingly, you'll need to dig out past statements. Complain to the Financial Ombudsman Service
If your bank hasn't given or a satisfactory response, or failed to respond within eight weeks, you've a right to take your complaint to the FOS.