US Edition
It was the best of bank accounts, it was the worst of bank accounts – depending on whether you have children, hit the slopes in the winter and are under the age of 70.
Packaged bank accounts commonly cost about £15 a month, and come with benefits such as travel insurance, breakdown cover and cashback deals. They can be a clever way to save hundreds of pounds a year – but if the terms and exclusions render the perks useless, or you double up on your cover, they can also be an easy way to leak cash with little to show for it.
“For every person who likes packaged bank accounts, you’ll find another who avoids them like the plague,” said Laura Suter of AJ Bell. “They are a great option for those who would have paid for everything on offer, but for many, they may get little or no benefit.”
With lots of accounts to choose from, and perks that can freeze out older customers, Telegraph Money finds the best packaged bank account deals.
What is included with packaged bank accounts?
Typically, a packaged bank account includes travel insurance, mobile phone insurance and breakdown cover, but how extensive this cover is varies from account to account.
Some accounts will include worldwide travel cover for the whole family, including the USA, while others restrict travel insurance to Europe.
When it comes to breakdown cover, some policies only cover roadside assistance and a towing service in the UK, while the more extensive insurers also offer home service and European cover.
Mobile phone insurance can range from covering one phone for the policyholder, to a range of gadgets for the whole family.
Such differences mean it’s vital to check the terms for each insurance policy when weighing up whether or not a packaged account is worth paying out for.
The best packaged bank accounts
The table below outlines what’s on offer from some of the best packaged bank account deals currently available, from the cheapest to most expensive.
What’s the catch?
As with all insurance products, the main thing to watch out for are the exclusions, terms and conditions – particularly if you are reaching the age of 70.
According to Defaqto, 11 of the 30 packaged accounts on offer exclude travellers over the age of 70, and only eight cover you up to the age of 79.
You also need to think about any medical conditions you may have that could make your insurance more expensive or, in the worst case scenario, completely useless.
“This includes all sorts of things you may not think of,” said Sarah Coles of Hargreaves Lansdown.
“Think past broken bones, and conditions like asthma and depression. In some cases they may refuse to cover you altogether, which might render the packaged account a waste of money.”
Make sure the deal you go for covers everything you need. If you sometimes drive in Europe, check the breakdown cover is not limited to the UK; if you spend time in the Caribbean, make sure your travel insurance is worldwide.
“Realistically, it’s a case of going through the account details with a fine-tooth comb to work out whether it is worth it,” said Ms Suter.
“You need to ask yourself: ‘Do I need these perks?’, ‘How much would they cost me elsewhere?’, ‘Do I already have cover?’ and ‘Does it actually cover everything I need?’.”
How to ensure a packaged account is good value
Before signing up for a packaged bank account, it’s worth looking back over the past few years to see how much you spent on travel insurance, phone insurance and breakdown cover.
By getting an idea of how much you already spend on these services annually, you can use the figure to set the maximum amount you should spend on a packaged bank account. Only consider the insurances that you would definitely buy.
If you can get the same cover or better from a packaged bank account, which costs the same or less than you already typically spend, then it could be a good deal for you.
In some cases, you can make huge savings. For example, the Virgin Money Club M account costs £150 a year, and its travel insurance includes worldwide cover, cruises and winter sports for two adults and up to four children.
If you usually go on a summer cruise holiday and a winter ski holiday as a family of six each year, you could spend a minimum of about £450 a year on travel insurance alone, according to MoneySuperMarket.
However, if you are more likely to spend a week in Europe and a long weekend in the UK each year, you could get cheaper travel insurance elsewhere.
As travel insurance costs increase as you get older, the travel insurance perks that come with a packaged bank account can be very cost-effective once you turn 70 – as long as the policy covers older travellers. Nationwide’s FlexPlus and the Halifax Ultimate Rewards accounts, for example, only cover travellers up to the ages of 69 and 70 respectively.
But there are still deals available for the over-70s. For example, The Co-operative Bank’s packaged accounts covers you up to the age of 79 and costs £180 a year. A couple who are both 75 would pay about £250 for a worldwide annual multi-trip policy, according to MoneySuperMarket, so the packaged account is worth it.
If you have a long-term partner, an easy way to get better value from a packaged bank account is to sign up for a joint deal. Most accounts will cost the same whether it’s held as a single or joint account, and you will both get the benefits.
The final step is to make sure that you are not “doubling up” on your insurance. For example, you might get mobile phone insurance through a packaged account, but if you are already covered by your home insurance, then this is a wasted perk.
Are premium bank accounts better than packaged bank accounts?
If you are a high earner, or can afford to have a large amount of cashing ticking over in a bank account, you could get some of the perks of a packaged bank account for free by opting for a premium account instead.
For example, the HSBC Premier bank account has no monthly fee and comes with worldwide family travel insurance up to age 69. To qualify, you must have either an income of £75,000 plus a mortgage, investment, life insurance or protection policy with HSBC, or have at least £50,000 saved with the bank.
Another option is the Citigold Current Account, which offers worldwide family travel insurance up to the age of 79, but you have to keep at least £150,000 across Citi UK accounts.
You could save money this way as you skip the monthly packaged account fee, but the perks are usually less extensive (for instance, you do not typically get breakdown cover included).
Again, it’s worth working out what insurance you would normally pay for, whether these accounts actually fit the bill in terms of what you need, and checking that exclusions and conditions do not render the benefit useless.