THEY’RE expensive and often useless, yet millions of us fork out every month for them when we’d be better off with a product costing nothing.
The good news, however, is that packaged or added-value current accounts are on their way out. Some ten million people spend an average of £180 a year on these accounts, many without using the perks for which they’re paying.
Those perks typically include cover such as travel, breakdown and mobile phone insurance, a preferential interest rate on credit, and currency exchange deals. For some people they’re valuable, but research suggests one in three people never uses the benefits for which they pay.
Last week Santander came under fire for kicking around 300,000 customers out of its paid-for reward and premium accounts, which it ceased selling last year. Those people will be shifted into free accounts from October, losing the perks they currently have.
Its move comes just months after Lloyds (temporarily) and the Co-operative withdrew their packaged accounts from sale – a sure sign that a crackdown on the accounts has hit the mark. New rules introduced in March force providers to make it clearer to customers what they’re getting for their money and to supply annual statements explaining exactly what’s included in their account, making it easier to work out if it’s worth paying for.
For too long the accounts have been sold to people for whom the benefits are useless or unsuitable, making them an easy money-spinner. Not for much longer though – and people are cottoning on. The Financial Ombudsman Service fielded almost half as many complaints about packaged accounts in the three months to the end of June as in the whole of 2012, with two-thirds upheld in favour of the customer.
Santander claimed its move was unrelated to regulatory changes, insisting it was simplifying its product range. Santander has already provided a glimpse of how we’ll be paying for current accounts when the free banking era eventually dies out. Its 123 account charges a £2 monthly fee in return for cashback on certain direct debit payments and a respectable in-credit interest rate.
If you’re paying for your current account it may be that you’re getting plenty back for your money. Chances are you’re not, though, so take another look and if you’re not getting enough bang for your buck, ditch it.