MoneyExpert.com research reveals rise of the packaged account Banks are charging an average of nearly £140* a year for packaged accounts as more customers sign up for current accounts that charge monthly fees, research by independent comparison website MoneyExpert.com shows.
However analysis reveals the average interest rate paid on packaged accounts is just 1.5 per cent with two-thirds paying less than one per cent. Average monthly fees for the 33 packaged accounts on the market are £11.59 a month with the lowest at £2 and the highest £25, MoneyExpert.com analysis shows.
Currently packaged accounts make up a third of the current account market with 14 of the 30 current account providers offering them to customers. Credit interest rates paid on sums of £1/£10 average just 1.5 per cent with only 10 accounts paying more than 1.5 per cent.
Packaged accounts are big business for providers ñ industry experts** estimate around one in five current account customers ñ nearly 11 million people ñ pay monthly fees for their bank accounts earning £1.38 billion a year for finance firms.
The accounts have proved successful because they offer products such as free annual travel insurance, commission-free holiday money, discount deals with leisure firms and breakdown insurance in return for the fee. But MoneyExpert.com is urging customers to carefully weigh up the benefits before they take out a packaged account as many fee-free accounts can offer as good a deal.
Sean Gardner, chief executive of MoneyExpert.com, said: ìPackaged accounts are proving popular with customers and banks and are likely to remain so. ìHowever the average credit interest paid on accounts is not particularly impressive at 1.5 per cent so customers must really value the added extras.
ìIt is easy to see the attraction for banks ñ they receive a monthly income from an account which otherwise might not make them any money in fees or charges. And for customers it can be a good idea. Clearly there wouldnít be nearly 11 million of us with fee-paying accounts unless we thought we were getting something in return from the monthly fee.
ìThat said however with monthly fees as much as £25 adding up to an annual fee of £300 customers have to make sure they use the special offers and deals. Anyone considering taking out a packaged account needs to think carefully about what the special deals are, how much they would cost to buy on their own, how often you would use them and whether that is worth the monthly fee.”
The lowest monthly fee of £2 is charged by First Trust Bank while Lloyds TSBís Premier Current Account and Premier Plus Current Account charge £25 a month. Banks which offer fee-paying accounts include Barclays, Royal Bank of Scotland, NatWest, HSBC, Co-Operative Bank, Smile, Clydesdale and Yorkshire. Providers who do not offer fee-paying accounts include Nationwide, Bank of Scotland, Halifax, Alliance & Leicester, Abbey and Northern Rock. Alliance & Leicester offers free European travel insurance with its Premier Current Account but does not charge a fee.
The highest credit interest rate paid by a packaged account on sums of £1/£10 is the 5.84 per cent at HSBCís Bank Account Plus which charges £9.95 a month. Lloyds TBS pays 3.93 per cent on its Select Plus, Gold Service Plus and Premier Plus.
Compare current accounts now
* Source: Defaqtoís Aequos database ** Defaqto