Packaged bank accounts look great at a glance. You pay a few quid a month and get all sorts of handy stuff thrown in ‘free’, anything from travel insurance to mobile phone insurance and vehicle breakdown recovery. Some come with ID theft insurance and offer slightly better interest rates on your savings.
But when you examine them closely, you might realise you’ll never use the so-called benefits and might not even qualify for them in the first place.
Say you’ve been paying £300 a year for three years – which isn’t uncommon – and you’ve never used the ‘special’ benefits it offers. You’ve spent almost a grand for no good reason.
Which has been looking at these accounts for several years and they invariably find you can actually buy the ‘free’ insurance and other benefits they include for less elsewhere. And some of the benefits aren’t much practical use in the first place.
Questions to ask yourself before you decide to buy a fee-paying bank account
Before you take the plunge, ask yourself these four questions:
- Do you genuinely need any of the benefits?
- Does the insurance it offers give you the cover you need?
- If so are you eligible to claim if you ever need to?
- Can you buy the benefits for less somewhere else?
- If it provides an interest-free overdraft, will the cost of the account as a whole cost more than the overdraft charges you’re currently paying?
New FSA rules from March 21st 2013
The UK Financial Services Authority (FSA) has been worried about banks mis-selling packaged accounts for some time. They’re bringing in new rules covering them for the new financial year, from March 31st 2013.
The rules will force banks to check whether you are eligible for each of the benefits on offer and let you know the outcome. They will have to identify whether each benefit is suitable and let you know if not. And they will need to send you an annual eligibility statement to remind you to check whether you’re still eligible and the ‘free’ products still meet your needs.
How to cancel your packaged bank account?
If you want to cancel a fee-paying account it’s usually a simple matter of calling or writing to your bank and downgrading your account back to a normal free one. If they don’t oblige or drag their heels, feel free to kick up a fuss – squeaky wheels tend to get fixed pretty damn quickly!
What about mis-selling?
If you feel you’ve been mis-sold a paid account you can make a formal complaint to the bank or building society itself. If you don’t hear from them within 8 weeks you can take your complaint to the Financial Ombudsman Service (FOS). With a bit of luck you’ll get your money back.