Learn to be a Financial Hunter - not the hunted

.Home..|..Banking & Savings..|..Credit Cards..|..Credit File Help..|..ISAs |..Equity Release.|..Mortgages..|..Stockmarket & Investing help

Banking & Savings section
FREE REPORT

How to Audit Your Credit File
With errors your rating will suffer
4 steps to a clean up mistakes
Don't discount the importance of your credit file - it's absolutely critical.....
Click here to get your FREE report
You Are Here: Home > Personal Finance > Banking & Saving > FAQ > Question and answer
What's wrong with

Packaged and Premium Bank accounts
Last update : July 2010
Two main points are wrong with Premium Bank accounts -
  1. They're usually expensive, and
  2. Many of the features and benefits are wishy-washy at best

What is a Premium bank account

It's an upgrade to your current account which normally costs between £15 - £20 a month. The benefits might include -
  • Better interest rates on savings
  • Higher overdraft limit and a lower interest rate
  • ID theft insurance
  • Dedicated phone line to customer representative
  • Travel and Breakdown insurance
  • Mobile phone insurance
  • Discounts to restaurants and Hotels
On paper the benefits often look like a good deal. But as ever the devil is in the small print. For example -
  • Better rates in savings - This may be the case but I am sure the interest rates could easily be bettered by the current Best Buy Savings accounts

  • Better overdraft limits - Again, this may be the case but many banks are open to negotiation. If you've got a standard current account I wouldn't be surprised if your overdraft limit can be increased merely by asking your bank

  • ID theft insurance - ID theft makes a good story but sadly the story has been hyped by the marketers who are using overblown scare tactics to sell overpriced insurance. Remember, under the Consumer Credit Act 1974, you are not liable for debts run up by a fraudster, provided you have acted honestly and used reasonable care. See What is ID Theft and how to avoid it

  • Dedicated phone line - Helpful for sure, but then my bank Natwest has an excellent telephone service and I don't pay for it. I doubt if I would get better service if I paid for it

  • Travel and breakdown insurance - But what about the restrictions and smallprint tricks? Normally a separate travel policy bought for around £50 a year has far better cover. As for breakdown insurance, chances are this will be a basic policy and probably won't cover you for every type of breakdown or emergency

  • Mobile phone insurance - Again, check the small print versus what a standard phone policy offers as there's been plenty of talk that these insurance policies are watered down

  • Discounts to restaurants and Hotels - Pure marketing fluff, unlikely to be worth the paper they're printed on
Summary

The problem the banks have is their endless reputation for playing tricks with their customers. And these tricks are usually carefully and skilfully hidden in the small print. See secret number 2 - Do your own research - it won't take long which is one of this site's 10 Secrets to Good Personal Finance

Does this mean that all premium style bank accounts are poor value for money?

No, I'm sure there are a few good ones out there. But unless you're willing to sit down for a couple of hours and work out the pros and cons (including studying the small print) of a premium account versus buying some or all of the products independently there's a good chance the bank will get the better end of the deal.

So if you're not willing to do this work stick with your present no-fee current account. That's how I've approached the matter - I use a standard Natwest current account, have negotiated a good overdraft limit, opened a separate savings accounts (which pays an excellent rate), and every year buy a travel insurance policy.
Looking for something? Then search this site:

Have You Read:
How to improve your Credit Rating
It's easy to do and it works wonders

© 2010 LearnMoney.co.uk All rights reserved

The information on the LearnMoney.co.uk website has been compiled from sources believed to be reliable, but is not warranted to be accurate or complete.
All recommendations and comments are provided for general interest only and should not be construed as advice.
Professional advice should always be sought before buying or investing in any financial product.
The price of securities and any income from them can go down as well as up.
Past performance of a security or market is not necessarily indicative of future trends.
Any opinions and recommendations on LearnMoney.co.uk are given in good faith, but without legal responsibility and are subject to change without notice.