Should you get a premium bank account? What do you get with a premium bank account and is a premium bank account worth the money? We look at the different types of premium bank accounts and how they compare with ordinary current bank accounts.
Most personal current account bank accounts in the UK are free to use, so is it worth swapping your free current bank account for a packaged or premium bank account with a monthly fee?
The answer depends on how you use your bank account and whether you would use the perks and rewards that come with a premium bank account.
Read on to find out whether it is worth switching to a premium bank account.
It is quite common for many consumers to stick with the same bank they first opened with their parents as a child, or the bank account they opened when they were a student.
These bank accounts provide basic but essential banking services, such as an agreed overdraft, cheque book, and the ability to withdraw and deposit cash and set up Direct Debits. Aside from that though, most of the time, there are no extra advantages.
By contrast, packaged bank accounts or premium current accounts offer extra perks on top of the usual banking service that you would normally expect.
Our guide explains the key features of a premium current account and can help you decide whether making the step up to a premium bank account is worth the extra money.
Premium current bank accounts, also known as packaged or sometimes gold bank accounts, offer the same service as the free current accounts on the market, while adding extras such as insurance and mobile phone cover, in return for a monthly fee.
If you use all the perks then the premium bank account probably offers good value. These perks include breakdown cover, travel insurance and in some cases, cashback for spending or using direct debits. You can compare a range of premium accounts to see if the benefits outweigh the monthly fee.
The average monthly fee for a premium current account is around £15, but they can be as low as £5 or as high as £25, depending on the account and the perks it offers.
Deciding whether it's right for you comes down to whether you will use all of the benefits.
While international travel is banned, and people are not commuting or travelling outside their home area, there are limited benefits to travel insurance and breakdown cover. However, as the UK opens up, these perks may become more relevant and more valuable.
The benefits that come with the account are covered by the cost of your monthly fee.
Premium current accounts could provide value for money if you use all the benefits on offer. However, in the current environment it may be cheaper to arrange mobile phone cover and breakdown cover separately from your bank account.
Read our guide on How to find the right bank account
Some features of a premium current account will actually be worth the money, if not better than the standard retail value. In other words, you may be getting family travel insurance more cheaply than if you bought a standalone policy. However, if you are unable to use the insurance because travel is curtailed, then the benefit is limited.
It comes down to finding a combination that works for you. You already know what you pay for breakdown cover and mobile phone insurance, so compare the combined costs with the annual cost of a premium bank account to work out whether you are getting a good deal.
There’s no shortage of premium current accounts – there are around 60 on the market to choose between, but many people are sticking to free bank accounts.
In reality, Britain is in the minority in still having a banking system where the majority of people don’t pay a fee for their current account, and the 7-day switching rule introduced by the Payments Council continues to give consumers a better choice.
Some banks such as First Direct offer cash incentives for customers switching over to their free current accounts.
Find out more about the Current Account Switch Guarantee
However, taking out a free high interest account could work out even better in the long term.
Bank accounts are even easier to switch these days so it's certainly worth shopping around the market to get the most out of your money, even if you're not willing to pay a premium on your current account.
If you are still stuck with the same bank account you've always been with, but enjoy their service, then take a look at their savings accounts and other offerings to see if you could be getting more out of them.
Otherwise, it may be best to do away with loyalty and see if there's more to gain from your savings or a way to turn your regular spending habits into rewards.
Read our Guide on How to easily switch current accounts
My partner wants to open a joint account. What are the risks?
When you open a joint account with a partner or spouse you are linking your finances together, so it is a good idea to think through the options before taking this step.
It can be very convenient if you are sharing the cost of rent or mortgage, as the money from your joint account can be used to pay for your household costs. When you open a joint account with someone, you create a financial link. If you both have a good credit score, this can improve your chances of being approved for a mortgage. However, if one of you has a poor credit history, this could affect the score. A joint account gives your partner access to all your money, so your relationship should be on secure footing. Should one partner choose to withdraw or spend a large amount of money you have no legal ground to get it back if it's a joint account.