Warning over packaged bank accounts as fees soar by 15%

Several high street banks are hiking their packaged bank account fees, which could see you pay as much as 15% more for the extra perks.

Lloyds, Halifax and NatWest are among the banks that have hiked the price on their packaged bank accounts by around £24 (15%), consumer group Fairer Finance found.

Packaged bank account can provide good value for some people if the perks are genuinely ones they use; the flat monthly fee can work out cheaper.Some include travel insurance , access to the best savings rates and even cashback offers.

But, as fees rise, is your packaged bank account still worth it?

This is not the first time packaged bank accounts have come under the spotlight either. Customers have in the past complained that they were mis-sold packaged bank accounts after paying fees for perks they were not eligible for.

James Daley, managing director at Fairer Finance said: “Given the new consumer duty regulations, it’s no longer OK for banks to sit back and let their customers get poor value from these products.

“They need to be making sure that customers are using the benefits - and if they’re not, they should be ready to downgrade them to cheaper, lower-frills alternatives. We’ve not seen any evidence that this is happening yet - and it may well be an issue that the FCA decides to take a look at over the year ahead.”

Here are the banks that have hiked their fees.

How much have packaged bank accounts gone up in price?

According to Fairer Finance, these banks have upped the fee on their packaged bank accounts.

NatWest, Halifax and Royal Bank of Scotland customers have taken the biggest hit, with its packaged bank accounts upping fees by £24 a year.

Lloyds Bank customers are also impacted, with four of its packaged bank accounts costing  £18 more a year.

The most expensive packaged bank account on the list is the Club Lloyds Platinum Account at £306 a year. But, £3 a month is waived if you pay in at least £2,000 a month.

Which packaged bank accounts are the best?

Packaged bank accounts are great if they meet your banking needs and you make use of their perks.

According to Fairer Finance, these packaged accounts offer insurance packages that are worth considering and could provide good value:

• Nationwide FlexPlus account offers an estimated insurance value of £740, at an £156 annual fee
• Bank of Scotland Silver Account offers an estimated insurance value of £393.91 at an annual account fee of £138

If you use other banks, you may be better off paying for insurance separately.

According to our sister site Go.Compare, here’s how much some insurance policies would cost:

• Annual multi-trip worldwide travel insurance costs an average of £57 a year (£43 for a European policy)
• Mobile phone insurance costs an average of £72.55 annually on an iPhone 15 with 128GB
• According to AA, its annual breakdown cover starts from £7.20 a month (£86.40 a year) if you buy in its current sale (as of 20 August)

Most packaged accounts also offer lifestyle benefits. Here are some examples:

• NatWest offers cinema discounts or a Tastecard membership worth £29.99.
• The Club Lloyds Platinum Account includes an annual Disney Plus subscription worth around £60. Or opt for cinema tickets, a Gourmet Society subscription or a magazine subscription. On top of that, up to 15% cashback at selected retailers.

Lifestyle benefits are ‘a nice to have’. So, if it’s something you want, as well as the three insurance policies, then a packaged bank account could be worthwhile.

Plus, there are cheaper packaged accounts that could be of value if you don’t want lifestyle benefits. For example, the Virgin Money M Plus account offers the three insurance policies, 1% cashback on spending, no fees when using the debit card abroad and exclusive savings rates – all for £150 a year.

Savings

Exclusive savings rates are another way banks try to reel you in – and it can be worthwhile if the returns are attractive since we’ve seen providers lower their rates due to the base rate cut.

• The Club Lloyds account has a 6.25% regular saver attached to them
• Earn 2.5% with Virgin Money’s M Club saver
• The Monzo Max account gives customers access to its 4.35% cash ISA

"Packaged bank accounts can offer great value if you use all the benefits. But they can also be a colossal waste of money if you don’t, says Daley.