Nationwide to cut interest and overhaul overdraft fees on FlexPlus account – is it still worth it?

Nationwide FlexPlus is our long-standing top-pick packaged bank account, offering travel and mobile phone insurance plus breakdown cover for a £13 monthly fee.

At the moment, it also provides a fee-free overdraft of up to £250 and pays in-credit interest of 3% AER on small amounts. But these features will be cut from the account from November, while changes to its insurance products mean you may have to pay a larger excess if you make a claim.

The Nationwide FlexPlus changes were first announced back in July, but it's only just started writing to customers by email or letter to notify them formally.

For full info on how this kind of bank account works plus our current top picks, see our Packaged Bank Accounts guide.

How is Nationwide FlexPlus changing?

Here's a breakdown of how what Nationwide FlexPlus offers will change in November:

• It will stop paying in-credit interest of 3% AER variable on balances of up to £2,500. From 1 November, you won't get any interest on your FlexPlus balance.

• It's hiking overdraft fees for many customers. Currently Nationwide FlexPlus offers a fee-free overdraft of up to £250, with a 50p/day charge on overdrafts of more than £250. From 11 November, this fee-free buffer will be scrapped, and all overdrafts will be charged at 39.9% APR.

  In practice, this means you'll be worse off if constantly overdrawn by less than £250 or by more than about £460. See our Nationwide to hike overdraft fees MSE News story for MoneySavingExpert.com founder Martin Lewis' full analysis of what this means.

  Nationwide has said that across all of its current accounts the majority of customers who use their overdrafts will be worse off as a result – though it hasn't told us specifically what proportion of Nationwide FlexPlus customers are likely to be affected.

• It's making small changes to the worldwide family travel insurance it offers. Currently, you get worldwide family travel insurance including winter sports and golf cover until your 70th birthday. That will remain the case, but from 1 November it's updating some policy terms, including changing some payout limits and adding in some optional upgrades – for example, after the changes it'll pay out up to £500 for valuables, up from £400 at the moment.

  As part of the updates, some restrictions will also be removed if you want to claim for a trip you cancelled, but there'll be some extra exclusions on whether you'll be covered if you participate in hazardous activities such as mountain biking.

• It's raising cover limits but also excess charges on its family mobile phone insurance. From 1 November, the insurance will cover phones worth up to £1,500 – up from the current maximum of £1,000. But you'll have to pay up to £50 more in excess if you make a claim for a lost, stolen or damaged phone.

  Excess charges for damaged or broken phones will be £75 for Apple handsets and £50 for non-Apple handsets, up from £50 and £25 respectively. And excess charges for lost or stolen phones will be £125 for Apple handsets and £100 for non-Apple handsets, up from £100 and £50 respectively.

You can see more details on the insurance changes on the Nationwide site.

There will be no change to the account's £13/mth fee, or the UK and European breakdown cover, which covers the account holder or anyone driving their eligible vehicle.

Is Nationwide FlexPlus still worth it after the changes?

We've had lots of emails from MoneySavers who have the Nationwide FlexPlus account asking if it's still worth the monthly fee after the changes. The answer will depend on your individual circumstances, but here are the key points:

• If you use the FlexPlus account for its insurance, it remains our top pick packaged bank account. Of our best buys it offers the most comprehensive cover – we calculate the travel, mobile and breakdown insurance could be worth £500+/yr in total. And £13/mth remains a competitive fee.

  Its closest rival, the Halifax Ultimate Reward account, will cost some just £12/mth from November, but the cover's not quite as good as the FlexPlus and you'll need to meet demanding qualifying criteria. This includes paying in £1,500+/mth, plus spending £500+/mth on your debit card or keeping £5,000+ in the account.

  But the main factor when working out if a packaged account is worth it for you is figuring out which of the benefits you'll actually use. If you won't use all the insurance, always check if you could buy it cheaper elsewhere. Our Top Packaged Bank Accounts guide gives a full rundown of the pros and cons.

• The interest rate cut is a blow if you keep money in the account – but you can earn more elsewhere. The 3% AER it currently pays on balances of up to £2,500 is handy, and some MoneySavers tell us they use what they earn from that to offset some of the monthly fee. If so, then the rate cut will mean what you effectively pay for the account each month will rise.

  Yet while 3% AER is decent, there are accounts out there which pay the same or more. For example, you can earn up to 5% AER fixed for a year on up to £2,500 with the Nationwide FlexDirect account, or 3% on up to £1,500 with the TSB Classic Plus – see more options in Top current accounts that pay interest.

• Many will pay more for dipping into their overdraft – so if you do, there are better options. If you've been using the Nationwide FlexPlus for its fee-free overdraft, you'll now have to start paying overdraft fees. The exact impact will depend on how much you're overdrawn by – as a guide, you're likely to be worse off if constantly overdrawn by less than £250 or more than £460.

  In any event, you're likely to be able to cut overdraft costs by switching to another account with a fee-free overdraft or looking at other options such as a 0% money transfer credit card. See Martin's blog Are you an overdraft prisoner? How to escape it for full help.

Ultimately, whether Nationwide FlexPlus is still worth it for you will depend on how you're affected by the combination of factors above. As a general rule, if you use FlexPlus for the insurance it offers and benefit from enough of the cover to justify the £13/mth fee, it remains a good option. But if you don't, or if you do but this will be outweighed by the extra overdraft fees you'll pay, it may be worth looking elsewhere.

What does Nationwide say?

Chris Rhodes, executive director of products and propositions at Nationwide, said: "As a mutual, Nationwide is not driven by profit. However, we are not immune to inflationary pressures and we need to make some essential changes to our FlexPlus account, so that it remains relevant to new and existing members at the same time as being a sustainable product for the society to offer.

"Members tell us that the quality of the insurances and the monthly fee are the most important aspects of a packaged account, which is why we have improved some of the insurance benefits and maintain the monthly fee rather than retain the interest rate."