Packaged bank accounts cost money to use so for most people, they’re not even worth thinking about. But packaged bank accounts can actually save you money – sometimes hundreds of pounds – if used right. Usually, they include breakdown cover, mobile and travel insurance, all for a relatively low monthly fee.
Of course, you need to work out if the benefits are actually cost effective in your circumstances: for example, if you don’t go on holiday then you don’t need travel insurance. Similarly, if you don’t drive then having breakdown cover is unnecessary. Plus, it’s always worth doing the usual research and comparison checks before applying just in case you can find a cheaper deal elsewhere.
Where can I find a packaged bank account?
Most traditional banks offer packaged bank accounts, and you can visit their website to find the specifics and compare the different options. Some accounts require you to have a normal bank account and then upgrade, while others will allow you to open a packaged bank account straightaway.
If you prefer to speak to someone about the pros and cons and how it can specifically benefit you, it might be easier to visit a bank branch and discuss the options with a bank advisor.
Some neo banks can help you save money as well although not generally in the form of packaged bank accounts. Usually they include additional saving measures so you can automatically save some extra cash. It might be worth looking into both types of bank account if you’re not sure you’ll make use of the benefits available with a packaged bank account.
How much do packaged bank accounts cost?
The cost varies between £10 and £20 a month for most mainstream packaged bank accounts. Some banks will offer rewards though, so it might actually work out cheaper. For example, if the monthly fee is £15 but you can earn £5 in rewards then it actually only costs you £10 a month for all your travel, breakdown and mobile phone cover – likely cheaper than buying all of them individually. Some accounts require a minimum income into the account, so if you have an irregular income you will need to see what the penalties are if you don’t meet the minimum deposit some months. It might just be a higher fee, but it could be that your insurance is invalid.
Are packaged bank accounts always cheaper than buying separate cover?
To compare the products properly it will depend on your specific circumstances, but considering basic breakdown cover can cost around £150 a year from big brand providers, if you pay £12.50 per month for your packaged bank account, then you effectively get mobile and travel insurance for free.
However, you must always read the small print: some policies might still require one-off fees. It’s a bit like having car insurance, but still needing to pay £75 excess to get your windscreen replaced. If you take good care of your mobile, it might not be an issue for you, but if you have to pay £50 each time you get the screen replaced (as an example) then together with the monthly costs, it can become expensive. Plus, things like breakdown cover can often be included in your insurance quote so make sure you don’t end up paying twice.
Can I get a free packaged bank account?
The short answer is no: not unless you have something like £100,000 in savings or you earn over £75,000 a year (the average UK salary before tax is around £37,000). Because of the benefits you get with a packaged bank account, the bank has to make some money off you so if you’re not directly paying to cover the fees, then you’ll need a large enough balance that they can make money from in a different way.
