Packaged bank accounts have been gaining a lot of bad publicity recently. The number of such accounts offered by banks has nearly doubled in the last four years, whilst complaints to the Financial Ombudsman Service about them has increased threefold. Basic banking in the UK has traditionally been free. So why are packaged accounts which cost the customer money being offered?
Packaged accounts are bank accounts which are designed to offer you added extras compared to a basic bank account. Typically extra items added to the account can be travel insurance, car breakdown cover or mobile phone insurance. Sometimes benefits include a higher interest rate on a savings account held with that bank. In exchange, you pay a monthly fee for this account. The fees charged for these accounts can be anything from £5-£40 which is typically automatically deducted from your account on a monthly basis.
Banks are a business and therefore need to make money. Usually they do this by re- lending the money customers deposit with them. Recently they have begun to do this by offering extra services. Banks have decided to offer additional services over and above account opening and charge for these.
It depends on what’s included in the packaged account, but the main plus side is that you could save money on extras included rather than having to buy them separately. You may also get a higher interest rate on a savings account.
Some people find that they don’t need all of the extras included with the packaged account so the fee they pay for the account is larger than the amount they would pay if they were to buy the extras they actually need separately. For example, if you’re paying £40 a month for your packaged account, over the course of a year this adds up to £480. Some people may find that if they travel abroad once a year, they could get travel insurance cheaper elsewhere. What’s more, some of the additional extras included in packaged accounts are already covered by other services. For example, mobile phone insurance can duplicate the cover you get as part of your home insurance policy.
Complaints around packaged accounts include customers not knowing their account was upgraded to a packaged account and therefore not realising they’re paying the extra fee or finding out there were limitations on the extras offered, making them unusable. Sometimes customers were told the packaged account was the only account available to them when it wasn't.
If you feel that you would like to complain about a packaged account that you have, you can do so by contacting the Financial Ombudsman Service, whilst Which? has a template letter you can use. You should also contact the account provider as well.
There are firms who will progress your complaint for you for a price. Whilst this may seem an easier method than doing it yourself, they will take a percentage of whatever money you may get back. Remember, there are no ‘hidden tricks’ to complaining. Sites like Which? and the Financial Ombudsman Service, will help you in making your complaint and will explain what you need to do and when. The Financial Ombudsman Service states: ‘We have continued to tell customers that they don’t need the help of a claims management company to bring us a complaint. We look at the facts and not at how ‘professionally’ a case is presented to us- and we prefer to hear from people in their own words’
If offered a packaged account, always do your research before accepting. Can you afford the monthly fee charged for the account? Will you use and do you need the extras included in the package? If so, can you find it cheaper elsewhere, or is it cheaper to buy the extras separately?