Packaged bank accounts - money products to avoidToo many accounts have features you can't use

25 January 2012

Packaged accounts offer poor value

Many packaged accounts offer poor value benefits that don't outweigh their cost

Nobody wants to pay for things they don't need. This applies to financial products just as much as home, technology and kitchen gadgets.

Everyday this week, we'll be analysing the products which we believe offer bad value for consumers, starting today with mobile phone insurance, card protection and today, packaged current accounts, outlining why we've launched a new campaign to ensure that consumers are protected from poor products in the future.

Packaged accounts fall short

Packaged accounts are current accounts that charge monthly fees - typically equivalent to around £180 a year. In return they come with benefits such as car breakdown cover and travel insurance. 

Packaged current account providers argue that they offer several useful products in one convenient, cost-effective package. But Which? thinks that many packaged accounts have serious limitations. For example, your packaged account may offer travel insurance that you can never claim on, owing to your age or a pre-existing medical condition. Or you may find that your car breakdown cover does not cover you for problems with your vehicle at home.

The Which? Money Helpline regularly receives calls from members who were sold packaged accounts but had no need for them. Which? is concerned that customers are often given the hard sell to sign up to packaged current accounts but are rarely told about their limitations or made aware of the alternatives that may be available

The Which? verdict on packaged current accounts

Packaged accounts can be good value for those who use some or all of the benefits and are aware of their limitations. But most people would be better off taking out a good, free current account and shopping around for the other products.

The Financial Services Authority (FSA) is consulting on the need for more restrictions on the way these accounts are sold. We agree with its suggestion that sales staff should have to carry out an assessment of the customer's insurance needs and should explain any exclusions on the policies that come as part of the package. 

Also, we believe the FSA should take a close look at the incentives that staff are given to sell these accounts.

Watchdog not lapdog campaign

We believe that the financial regulator should be responsible for putting a stop to poor-quality financial products, which is why we're launching our new 'Watchdog not Lapdog' campaign.

At the start of next year, the current regulator, the Financial Services Authority (FSA), will split into two new authorities:

  •  The Financial Conduct Authority (FCA), which will have responsibility for protecting consumers
  •  The Prudential Regulation Authority (PRA), which will focus on maintaining financial stability

We want to ensure that the FCA puts consumer protection at the heart of everything it does – and make sure it becomes a watchdog that keeps the financial services industry in check, not a lapdog that panders to it.

More on this...

  • The Which? Money Helpline - we'll help if you have any queries about financial products and services
  • The Watchdog not Lapdog campaign - we explain what our new campaign is trying to achieve
  • Support our campaign - sign up to the Watchdog not Lapdog campaign to call for greater consumer protection