Packaged accounts can be a good deal for some, but they are not for everyone.
If you’re thinking of getting one, ask yourself:
- How many of the extras do I really need?
- Could I get the services separately for less?
- Does the insurance give me the right amount of cover?
- Do I already have cover through another product? For example, do you have cover through your home insurance policy?
- If the account gives me an interest-free overdraft, am I currently paying overdraft fees and charges higher than the cost of the packaged account?
If you aren’t going to use a packaged bank account that often, sticking with a free current account is probably the cheaper and better option for you. Furthermore, it may not be best to opt for a packaged bank account if you are only interested in a single benefit. It may seem attractive with the additional benefits, but it can be much cheaper if you just purchase what you need separately.
For example, if you’re thinking about switching to a packaged account just because you need an overdraft, first ask your bank if they can add the same benefits to your existing current account which can work out cheaper.
Regulations and important things to know about Packaged Bank Accounts
Packaged bank accounts are regulated financial products. This means that a business must be regulated by the Financial Conduct Authority (FCA) to sell you a policy and underwrite the insurance. They have a certain set of rules that must be adhered to when selling packaged bank accounts to their customers.
Your bank or building society must take reasonable care to check whether you are eligible to make a claim on each insurance policy that the account will provide. Any information that is relevant to you and your account must be provided. The providers should make you aware of the cost of your account, along with the key features and exclusions involved in any insurance policy. The information provided should be clear, fair and not misleading so you can make a fully informed decision.
Whilst you are using your packaged bank account, your bank or building society are also required to provide you with an annual eligibility statement. This sets out the eligibility requirements for each of the insurance policies in the account and is part of an ongoing process whilst the account is active.
When you receive this statement, you should review your personal circumstances. If anything has changed you must contact your provider to make any changes that will ultimately help you. Doing so will avoid the risk that you become ineligible for one or more insurance polices that your account provides. Additionally, your financial circumstances may have changed, and you can’t afford the bank account anymore so cancelling may have to be an option.