Are you making the most out of your bank account? Sometimes changing bank accounts is the last thing we think about because it might seem like a hassle to make all the arrangements. However, if you were to compare all the different types of bank accounts you might find that there’s an option that better fits your circumstances and could potentially save you money. For example, packaged bank accounts are accounts that include some extra benefits as a part of a package for which you pay a monthly fee. The benefits vary between bank accounts so you would still need to research which account suits your lifestyle before switching, but we’ve listed the most common benefits of packaged bank accounts and some things to consider while you research to make things a little easier for you and your money management.
How is a packaged bank account different from a regular current account?
While some standard current accounts might offer benefits like earning a small amount of interest on your balance, there are several more advantages that come with using a packaged bank account. Of course, these things don’t come free. Packaged bank accounts usually charge a monthly fee which can cost anywhere between £13 and £31 a month for the most common banks, so although you might get a few benefits, there are still a few things to consider before switching banks. Not every bank offers the same benefits, but you can usually find a mix of the below:
Breakdown cover for you or for your vehicle
The policies can vary between banks so you would need to check the terms and conditions to ensure your driving criteria is covered.
Travel insurance
You might need to check if the travel insurance covers your family or just you – if you need to take out additional insurance to cover the people you’re travelling with, then it could become costly. Plus, if you tend to go on active holidays or skiing, you should check if the travel insurance covers these additional sports.
Mobile phone insurance
Usual mobile phone cover is between £1500 - £2000 which means most smartphones are sufficiently protected. But there can be excesses to pay and limits on whose mobile phone is covered. For example, if you have children over the age of 18 their phones might not be covered, or you may have to pay a £50 excess to replace a smashed screen.
Preferential rates on certain financial products
As an incentive for customers to choose a specific bank, they may offer reduced or discounted rates on certain financial products like overdrafts and mortgages, or they may pay a higher interest rate on a savings account you also have with them. This doesn’t mean you can’t find similar rates elsewhere though, so always research your options and different lenders before taking out any kind of credit – even online loans.
0% interest rate arranged overdraft
The limit for this perk is usually around £50, so it’s probably not going to be a game-changer in the way you manage your finances, but if you find you occasionally dip into your overdraft by a few pounds then knowing you have a free overdraft of even just £50 could bring you a certain peace of mind.
How to choose if you should use a packaged bank account
When making financial decisions, you always need to be fully informed of the consequences – both good and bad. This is no different with packaged bank accounts. Packaged bank accounts can save you money, but only if you need the services that are included. For example, there would be little reason to use a bank account that offers breakdown cover as it’s main reward, if you don’t drive or use a vehicle. However, if you need mobile phone insurance or intend to remortgage any time soon, then the benefits that do apply to you might outweigh the ones that don’t.
You also need to factor in the monthly costs and how this could affect your budget – especially over the year. While £13 might not sound like a lot monthly, this adds up to over £150 annually. You should consider if this money would be better spent elsewhere. Plus, if you find you are frequently searching for where to borrow money, then adding additional financial responsibilities to your budget might not be the best idea, unless you know for certain that paying the monthly fee for a packaged bank account will actually save you money. If you already pay for mobile phone insurance or breakdown cover, then there’s little point switching bank accounts until your contract ends as you’ll be paying twice otherwise.
If you’re still not sure that you would definitely save money, then perhaps consider altering your research to determine whether a packaged bank account is the best value for money. In most cases, you might struggle to find breakdown cover, phone insurance and travel insurance for less than £150 a year. But if the breakdown cover offered by the bank is insufficient for your driving needs, you would end up paying more either as part of your call-out should something go wrong, or with a vehicle breakdown provider separately. Or, you might have to use a different packaged bank account which could cost more.
Ultimately, if you’re trying to save money or if you’re budget conscious, then packaged bank accounts could help you out in the long run, but you need to get your timing right and choose the account that best matches your needs.
