Is it worth swapping your free bank account for a packaged or premium bank account with a monthly fee?
It is quite common for many consumers to stick with the same bank they first opened with their parents as a child.
These accounts are usually the basics, allowing you to withdraw and deposit cash and set up Direct Debits. Aside from that though, most of the time, there are no extra advantages.
Packaged bank accounts or premium bank accounts offer a few extra perks on top of the usual banking service that you would normally expect.
Our guide explains the key features of the current account market’s best premium bank accounts and can help you decide whether or not making the step up to a premium bank account is worth the extra money.
What is a premium bank account?
Premium 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 a few added extras in return for a monthly fee.
These perks include handy extras (or pointless ones, depending on your perspective) such as breakdown cover, travel insurance and even cashback. 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 or not you will make use of all of the benefits.
Benefits of premium bank accounts
The benefits that come with the account are often marketed as free, but in reality you’re paying for them with your monthly fee.
The controversy around premium bank accounts surrounds whether they really provide value for money. As with anything else, a packaged account is only worth the fee if you’ll make full use of the benefits it offers.
It’s important to do some sums to work out if a premium account will be worth the same as or more than the monthly fee to you individually.
Some of the perks will actually be worth the money, if not better than the standard retail value, but combined, they may not be everything you need.
Therefore, you could be paying the entire monthly fee just to receive, for example, the mobile phone insurance, but never use any of the other perks. For the full price you’re paying, you could get the mobile phone insurance separately and possibly cheaper.
Some premium bank accounts will offer travel insurance as well as other benefits, but there’s no point in paying the monthly fee if you only want the travel insurance and nothing else
It comes down to finding a combination that works for you.
Free bank accounts with benefits
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.
However, taking out a free high interest account could work out even better in the long term.
The Nationwide FlexDirect’s 5% interest on balances up to £2,500 can be worth £125 per year, which can more than match First Direct’s one-time £125 incentive.
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.
- Premium Credit Cards If you’re a big spender there are premium cards with you in mind
- Business Credit Cards Specialised credit cards for business can offer unique extras
- Airmiles Credit Card Airmiles are one of the most sought-after rewards offered by credit cards