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.
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 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 check whether you were missold
We're becoming deluged with successes from our Reclaim Packaged Account Fees guide which launched last year. Many were flogged fee-paying accounts with 'perks' such as travel and mobile insurance which didn't actually cover them. EVERYONE who pays a monthly bank account fee should CHECK NOW.
If you got one of these because the bank called you, or it invited you in to say "you're a special customer" then upsold it to you, or it told you "you have to get it...", then it's likely at best you're paying over the odds. At worst, you were mis-sold and are due cash back.
DON'T ignore joint accounts
With most packaged accounts the perks are valid for all account holders. Open it jointly and you're both covered, for the same fee, effectively boosting the account's value. So this means even if you both won't use the account, add a partner a to boost the account's 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.
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 if you stay in credit, plus a £100 bonus for switching. 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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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
FREE travel insurance & no fee*
Nationwide Flexaccount* Monthly fee - £0
A great way to get completely free European travel insurance is Nationwide's* FlexAccount. It's a decent policy and provides cover up to age 75, 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.
Need to knows
- 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.
- In-credit interest: None
- Min monthly income: £750 (explanation)
- Arranged overdraft cost: 3 months fee-free then 18.9% EAR
- Unarranged overdraft cost: Up to £15 interest charged at 18.9% EAR. Over £15 interest at 18.9% EAR plus £15 paid / unpaid item fees (max £75/mth)
How does the travel insurance compare? Upgrades are very reasonably priced. At £20/year for worldwide cover, £30 for family and £40 for winter sports, they can be cheaper than 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.
Are there any other perks? If you're accepted, you'll also be eligible for the Nationwide Select credit card. It gives 0% load on overseas purchases, as well as 0.5% cashback on UK spending, 26 months 0% on balance transfers, cheap overseas spending and 0% on purchases for 15 months. See Cashback Cards for more details.
Also, If you refer a friend and they successfully switch to a Nationwide current account you will both receive £50. You can refer up to 10 friends a year.How is the bank rated? In our February 2014 poll of the nine big banks, Nationwide was 4th, with 67% voting it great, 26% OK, and just 7% voting it poor.
£600 of high-end travel, mobile & breakdown for £120*
Nationwide FlexPlus* Monthly fee £10 (£120/yr)
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.
Need to knows
- Extended warranty cover for an additional 12 months on all new household electrical items between £50-£2,000.
- 3% AER in-credit interest on balances up to £2,500, beating top savings accounts.
- In-credit interest: 3% AER up to £2,500
- Min monthly income: None
- Arranged overdraft cost: 3 months fee-free, £100 fee-free buffer after, 50p per day above that
- Unarranged overdraft cost: Up to £10 charged 50p/day. Over £10 charged £5 per day (max £50/month)
What does the worldwide family travel insurance cover? It 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.
What does the mobile phone insurancecover? It 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 (children must be under 19, or 22 if they are in full-time education, and cannot be married or in a civil partnership) - so maxed out, this gives serious value. See mobile insurance for more details.
What does the LV breakdown cover? It's 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.
Can I use the card abroad? 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 on UK spending, 26 months 0% on balance transfers and 0% on purchases for 15 months. See Cashback Cards for more details.
How is the bank rated? In our February 2014 poll of the nine big banks, Nationwide was 4th, with 67% voting it great, 26% OK, and just 7% voting it poor.
Are there any other perks? If you refer a friend and they successfully switch to a Nationwide current account you will both receive £50. You can refer up to ten friends a year.
Top alternative: 3% savings & bills cashback*
Santander* Monthly fee £2 (£24/yr)
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.
Need to knows
- After the fee, we worked out low users would be up by £47 a year, average users by £115 and high bill payers could be £226 in profit.
- 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.
- 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 is 0% APR for four 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.
- In-credit interest: 1% AER if you've £1,000-£1,999.99; 2% if you've £2,000-£2,999.99; 3% if you've £3,000 - £20,000
- Min monthly income: £500 (explanation)
- Cashback: 1% on water, council tax & Santander mortgage, 2% on gas & elec, 3% on phone, internet & TV
- Arranged overdraft cost: £1/day, capped at 20 days/mth. 0% for 4mths after switching
- Unarranged overdraft cost: £5/day
How do I get the cashback perks? To get the cashback 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 upgrade 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"How is the bank rated? In our February 2014 poll, 74% voted Santander 123 great - putting it in 2nd place - 22% OK, 4% poor.
Top Premium Accounts
While you can pay for the accounts above, most banks also have a 'premium' account. This is generally for people earning high salaries (usually £100,000+) or who have significant investments or mortgage debt.
These premium accounts are generally seen as a halfway house between the paid-for accounts above, and proper private banking. Perks associated with the accounts vary. Some include insurance, access to concierge services, or discounts on mortgages or other associated products.
HSBC's our top pick, as it's free and gives free, worldwide family travel insurance as well as big discounts on mortgages.
Free worldwide travel insurance
HSBC Monthly fee - £0
Premier account holders with HSBC get worldwide, free family travel insurance, plus can save £300 on mortgage fees and often get mortgage rate discounts.
This account's worth getting, if you can, for the travel insurance. The mortgage discounts are good, but HSBC isn't always going to be able to provide the best mortgage for you. It's always wise to look at the whole mortgage market when choosing a new mortgage.
Need to knows
- It's fee-free, but to get it, you must hold over £50,000 of investments with HSBC or have a salary of £100,000 plus a HSBC mortgage, investment or life insurance product.
- If you're not eligible, you may want to consider the Advance account costing £12.95/month. The deals aren't as good but you'll still get £200 off fees - good if you're considering a HSBC mortgage anyway. It also comes with UK breakdown cover.
- In-credit interest: none
- Min income: £100,000 salary
- Arranged overdraft cost: 0% on the first £500 then 11.9%
- Unarranged overdraft cost: £25 paid or unpaid fee of £0, £10 or £25
What do you get with the insurance? It's up to age 69, including winter sports and business cover for a maximum of 31 days per trip. Children under 18, or 23 if still in full-time education and living at home outside term time, are covered if they're travelling with the account holder or staying with relatives abroad. Pre-existing conditions may not be covered, so check before you travel. See the full policy document. The HSBC Advance only - UK breakdown cover with Mondial Assistance, includes home assistance. It's a personal policy so will cover all account holders if opened in joint names. See the full policy document.How is the bank rated? In our February 2014 poll, 42% voted HSBC great, 43% OK, 15% poor.
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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|
The financial regulator, the FCA, has been investigating how packaged bank accounts have been sold over a number of years. It found 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.
Like all insurance products (which is what these really are), the bank needs to ensure it's suitable for you. It's starting to look like banks systemically failed to do that. A common example is customers aged over 65 not being told they weren't eligible for travel insurance.
Our full Reclaim Packaged Bank Accounts for Free guide has got all the info you need to work out if you may have been missold, including a full mis-selling checklist, and template letters to send to your bank if you think you were.