Benefits of paid for current accounts in doubt

12 September 2008 / by Rebecca Sargent
As more banks introduce paid for accounts as standard, the Defaqto 'Current Accounts – All change' report is questioning whether the benefits offered are worth the monthly charge.

The UK has been one of the only countries in Europe to enjoy free banking for so long, but as the fairness of bank charges for unauthorised overdrafts comes into question, banks are warning that they may have to put an end to free banking.

Banks made billions of pounds each year through 'unfair' bank charges and have threatened that if they cannot continue to do this they will have to charge for current accounts.

As a result, UK banks have gradually been introducing 'added value' current accounts over a number of months now and the charges and incentives offered vary greatly.

According to the Defaqto research, each incentive offered costs customers an average of £1.27 each month, but some incentives are of more value to the customer than others.

Principal consultant of banking for Defaqto, David Black, said: "The array of incentives offered by added value current accounts varies considerably, and some, such as travel insurance, are clearly of more value to the consumer than others."

Commenting on whether or not they are worth it, Mr Black added: "For the consumer the main decision on whether to transfer to a paid for account should be based on whether they actually want the incentives offered, and, for those that they do want, whether they can buy those items that they actually require more cheaply independently. For example a preferential rate may be offered on, say, a savings account, but it is quite possible that a better rate will be available elsewhere."

According to the report, the average number of incentives offered by an added value current account is just over 11 and the monthly charge can value from £3 for the Barclays Current Account Plus, to £25, whereas the average cost is £14.24.

Concluding, Mr Black said: "Added value current accounts are being increasingly heavily marketed and there is already significant variance in the accounts offered with some providers differentiating between enrty level, medium and premium offerings."

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