WHY PAY FOR A CURRENT ACCOUNT?
Halifax is to raise the cost of its Ultimate Reward current account by
£30 to £180 a year and cut the services that are included. If you pay for your
current account – with Halifax or any other bank – it is sensible to consider if
you are getting value for your money.
Anyone who tries to open a current account with a bank will almost always
be offered one that comes with a monthly fee. That fact alone tells us that the
banks like these paid-for accounts because they are profitable.
But for customers the benefits of paid-for accounts are often spurious.
One of the most popular benefits is mobile phone insurance. It will replace your
handset if your phone is lost of stolen. But if the contents of your home are
already insured, then your mobile phone is probably covered by that. Paying
twice is a waste of money.
Other insurance products bundled with your packaged current account may
include ID theft insurance and car breakdown cover. ID theft cover is never
worth having – if your ID is stolen the bank reimburses your loss anyway. And
many people do not drive a car. Even if they do it may be the most basic cover
that is included. Overall, the stated
‘value’ of a packed account is usually exaggerated.
Another popular part of the package is annual travel insurance. Younger
people can often get that at a lower price elsewhere. But much older people may
find it very difficult to obtain at a reasonable price. Getting it bundled with
a current account may be a solution. But always check the conditions carefully
to make sure you are covered.
Many packaged accounts come with a small automatic overdraft facility.
That may be useful. But think very carefully if it is worth the high price you
are paying.
The Financial Services Authority is investigating the packaged current
account market and has already made it clear that the bundled insurance products
must be sold under the same rules as any insurance sale. If you feel your
packaged account was sold to you without explaining the insurance you are buying
then you may have a claim for mis-selling. The consumer organisation Which? has
also expressed concerns about these accounts.
And always remember, as Halifax has shown, the price can go up and the
service down at any time.
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