Bank customers warned to avoid fee paying accounts

Miserly credit interest and expensive up front costs means customers should think twice, says

Bank customers paying fees for so-called packaged accounts are getting very little for their money compared with customers in free accounts, according to new research from

The independent financial comparison website says that the average credit interest rate on packaged accounts is just 2.1 per cent – a miserly 0.2 per cent more than the average available through free banking, which is 1.9 per cent.

The average monthly fee of a packaged account is £11.61, with some accounts charging as much as £25 a month. is warning customers who pay a monthly fee that many packaged accounts do not offer value for money, particularly for those who do not take full advantage of the incentives and special deals available.

The figures show that over half (58%) of all packaged accounts pay less than 2.5 per cent AER on positive balances, with 23 of the 63 accounts available paying a miserly 0.25 per cent or less. Only four packaged accounts pay over 6 per cent if you’re in the black, according to

By contrast the website’s figures show that there are some 37 free current accounts on the market paying 2.5 per cent or more, with eight accounts from six providers offering customers over 6 per cent credit interest on positive balances.

Sean Gardner, Chief Executive of, said: "Banks do offer customers significant incentives for signing up to a fee-paying current account. Typically you can expect free travel insurance, better savings rates, free gifts and a dedicated personal adviser.

"But often there are many benefits included which customers should be able to find elsewhere anyway, such as commission free travel money, cheap credit card deals and payment protection insurance.

"The basics of a typical fee-paying current account are frankly terrible value for money. You don’t have to be a mathematician to see how an average interest rate of just 2.1 per cent compares to free banking if you have to pay a typical fee of £11 for the privilege.

"Anyone who is offered a fee-based current account by their bank should question every last detail of their offer. The chances are you won’t use half the benefits on offer and if that’s the case you’ll lose money. Simple as that."

The research also showed that packaged accounts offer only slightly less punitive interest rates on unauthorised overdrafts. Paying customers who go into the red without permission can typically expect to be charged a monthly fee of £13.64 on top of an APR of 19.03 per cent on their borrowing. Free banking customers would pay on average £14.76 per month with an APR of 22.07 per cent. says some of the best value packaged accounts are those that combine a high rate of credit interest with a reasonable monthly fee. These include:
– Alliance & Leicester Premier 50 – £10 per month, 8.5% AER
– HSBC Bank Account Plus – £12.95 per month; 8% AER
– HBOS Ultimate Reward Accounts – £10 per month; 6.17% AER offers a unique service which enables people to find the financial products which best meet their specific needs, and which they are more likely to be successful in being accepted for. It includes exclusive research conducted by MORI, which reveals providers’ service levels. This information is married up with a financial database which lists the products suited to the customer. For the first time, people can review a product’s price, features and also the level of service offered by the provider to enable them to make a more informed choice. aims to demystify the complex world of personal finance, and to help inform customers of the choices available. The service can be found at

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