Beware current account incentives
Customers with incentives linked to their current accounts aren’t getting value for money, new research has claimed.
According data provider Defaqto, there are 32 different current account incentives on offer, from home insurance to concierge service. Such incentives are normally attached to fee-based current accounts, which cost consumers an average £1.27 each per month.
The average fee-based account (also known as added value) includes 11
incentives, including everything from preferential savings rates, home
and travel insurance, home emergency service, concierge and even
airport lounge service.
However, Defaqto says they do not represent value for money.
"Banks are very keen to migrate their customers from free current accounts to added value accounts as the they provide them with a guaranteed income stream,” says David Black, principal consultant of banking for Defaqto “[But] consumers need to base their decision on whether they actually want the incentives offered and whether they can buy those items that they actually require more cheaply and independently.
"For example a preferential rate may be offered on a savings account, but it is quite possible that a better rate will be available elsewhere."
Samantha Owens, head of cards and loans at data provider Moneyfacts agrees. “If you are choosing to an added value account, also remember to weigh up whether or not you will actually use the incentives too.
"So make sure you register your mobile phone if you are offered mobile cover, and check to see that your travel insurance covers your specific circumstances. Getting value for money will vary from person to person.”
What’s on offer?
Defaqto’s research that there is a significant variance in the accounts offered with some providers differentiating between entry level, medium and premium offerings.
Barclays Current Account Plus
Cost: £3 per month
Benefits: Interest-free overdraft up to £300, cardholder protection, identity Support Advice Line, extended warranty cover on domestic appliances.
Halifax Ultimate Reward Current Account
Cost: £12.50 per month
Benefits: Worldwide travel insurance, £300 interest-free overdraft, RAC breakdown cover, mobile phone insurance, discount on Halifax car insurance
NatWest Advantage Gold
Cost: £12.95 per month
Benefits: Mobile phone insurance, car breakdown cover, annual travel insurance, accidental death benefit
Royal Bank of Scotland Royalties Gold
Cost: £12.95 per month
Benefits: Worldwide travel insurance, mobile phone insurance, breakdown cover, identity theft protection, home emergency cover, extended warranties, 25% off tickets
Cost: £12.95 per month
Benefits: Worldwide travel insurance, roadside breakdown assistance, identify theft assistance, life cover/accidental death benefit
Lloyds TSB Premier
Cost: £15 per month
Benefit: AA breakdown cover, worldwide travel insurance, mobile phone insurance, home emergency cover, airport lounge access, meet and greet service, identity theft protection
Citigold Current Account
Cost: £25 a month
Benefits: Dedicated relationship manager and investment consultant, no obligation financial review, worldwide travel insurance, identity theft insurance, free overseas banking.
NB Only available to customers who maintain a minimum average monthly balance of £50,000
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
The theft of personal information such as name, address, phone numbers, bank and credit card account numbers, driving licence or national insurance number in order to steal a person’s “identity”. Identity theft then usually results in money being stolen from the victim’s bank account and savings, or the criminal running up enormous credit card bills, obtaining passports and other official documents such as birth, death and marriage certificates in their victim’s name. The National Fraud Authority estimates identity fraud affects more than 1.8m people in the UK every year at a cost of £2.7bn.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.