Premium accounts: Bank like the rich and famous

14 October 2014

If you’re lucky enough to be a high earner, or have significant sums saved or invested, you may be eligible for a 'premium' bank account. Effectively, they're packaged accounts for the well-to-do.

Think of them as the middle ground between packaged accounts - current accounts that come with added benefits such as travel insurance that are available to the masses in return for a monthly fee - and private banking, which has long been the preserve of aristocrats, oligarchs and, more recently, footballers.

Besides the wallet-sized status symbol that is the flashy debit/credit card that generally comes with the premium account, there are four main advantages of having one.

1. A more personalised service: premier customers usually get access to a 'premier banking team' that will give you support over the phone. But if you're really lucky/rich, you'll get a 'personal account manager' who will be available to you by phone, and maybe face to face depending on your circumstances - or how many zeros your bank balance contains.

The more personalised service is the main attraction of such accounts for many customers. And, of course, for the banks, the more often they're in touch with their rich clients, the more money they stand to make from selling them other products and services.

2. Added extras in the shape of preferential rates and fees: customers are often able to get better savings and mortgage rates or reduced fees. Let's take a look at the perks granted to HSBC Premier customers to illustrate this point. First off, they can get an interest-free overdraft facility up to £500, subject to status (while all other non- student/graduate HSBC account-holders must pay for their overdrafts).

They can also access a regular saver account, paying 6% gross interest fixed for 12 months (while standard bank account customers get 4%) and the Loyalty Cash Isa, which pays 1.6% AER variable (1.4% for standard bank account customers).

A personal loan is also on offer and Premier customers can borrow between £7,000 and £25,000 at a rate of 3.9% APR variable. While non-Premier customers can borrow at the same rate, they can only do so for amounts between £7,000 and £15,000.

Moving on to mortgages, various savings apply, and usually on the booking fee. For example, the two-year fix at 70% loan-to-value at 2.19% has a booking fee of £999 for non-customers, £499 for standard current account customers and just £299 for Premier customers.

3. Convenience: Premium accounts often position themselves as a tool for busy professionals. For example, they generally allow customers to withdraw larger sums of cash from ATMs per day. Barclays Premier customers can withdraw up to £750 a day, compared to the £300 available as standard. Other perks are marketed for their convenience, too.

For instance, most premium accounts come with worldwide travel insurance for the customer, their spouse and dependants (when travelling together) – so that's one last thing to worry about when organising that umpteenth trip of a lifetime.

4. Perks: Even the rich get satisfaction from getting something for nothing and premium accounts usually make a song and dance about the sheer number of rewards, discounts and special deals they give their customers access to. For example, the Barclays Premier account doles out free cinema membership, access to an exclusive lounge at London's 02 for the customer plus two guests, free entrance to 280 English Heritage sites and free entry to exhibitions at the Royal Academy.

If you're drooling at the thought of all of the above, here are a few other points you should consider before revving up the Jag and cruising down to a local bank to open an account.

Find the best savings account for you

How do they differ from packaged accounts?

Packaged account benefits such as travel insurance have been widely criticised by customers and the financial services regulator and ombudsman for failing to offer value for money because customers were often unable to claim on the policies.

As a result, many banks have ditched their accounts. Premium banking accounts differ from packaged accounts in that the added extras in the form of insurance products aren't the main draw for customers - the more personal service is. This makes them more similar to the world of private banking, where the ultra-wealthy receive a highly personalised service and enjoy the prestige this affords them.

Traditionally, there haven't been monthly fees for having a premium account either (although, as mentioned above, the NatWest/RBS account is an exception). This is because the banks make money from the services they're able to upsell to wealthy customers, who usually have more complex needs than the rest of us.

For example, they may need separate accounts for foreign currency transactions to do with running second homes abroad and the bank earns fees from those transactions. And, of course, the more money a customer has deposited with a bank, or invested with it, the more profit the bank can make by lending out that money to other customers.

Where can I open a premium account?

The choice is shrinking, after Santander, Lloyds and TSB all pulled out of the broader packaged account market in an attempt to distance themselves from criticism that such accounts offer consumers little to no value for money. In fact, customers with Santander Premier or Premier Direct accounts saw them converted into Everyday accounts as recently as 30 September.

So to cut a long story short, just three high street banks offer premier bank accounts to new customers - HSBC, Barclays and NatWest/RBS.

Am I eligible for a premium account?

A minimum annual salary or level of savings and/or investments usually applies. Barclays sets the minimum annual salary at £75,000, which must be paid into the account, while the threshold for savings and investments is £100,000.

HSBC's minimum level of savings or investments is lower at £50,000 but the annual income is higher at £100,000. But even £100,000 a year isn't enough to get you in, you'll still need a mortgage with the bank or an investment, life insurance or other protection product.

Eligibility for the NatWest/RBS Black Account is also restricted to those who earn £100,000 a year, customers with a minimum outstanding NatWest/RBS mortgage of at least £300,000 can also apply, as again can those with savings and investments of at least £100,000 at the bank.

How much will it cost me?

Of the three UK high street premier account providers, only NatWest/RBS charges, for its Black Account at £24 a month. However, banks inevitably claw back cash through product and commission fees.

Should I open premium bank account?

One wealth manager told Moneywise that most of his clients have some form of packaged or premium account and view them positively. However, he says: "I question the value of such accounts when a monthly fee is involved.

The banks rely on inertia - the fact that customers are unlikely to take full advantage of the rewards on offer to make the fees worthwhile. So I'd advise clients paying for such accounts to look at other alternatives such as the Santander 123 Current Account that pays 3% on balances between £3,000 and £20,000 in return for a much lower monthly fee of £2."

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