An new FSA report warns that product bundling can create risks for consumers and suggests packaged bank accounts don’t always represent good value for money.
The financial services authority (FSA) says that 15% of UK adults now have some form of packaged account and that consumer detriment could occur across a large population as a result.
Bank accounts and insurance risk
The FSA warns that some account holders may find that ‘where the add-ons are insurance products, they do not provide the expected level of cover’. Breakdown insurance, travel insurance and life insurance may be better purchased individually, providing more extensive cover and meeting a particular customer’s requirements.
As well as raising doubts about the level of cover they provide, the FSA questions the value of packaged accounts, observing that, ‘consumers could be better off purchasing products individually or not at all’. This is what Which? found when we assessed packaged accounts. Many account holders do not use the full range of extra services they are entitled to. We also queried the value of mobile phone insurance or extended warranty cover, which some packaged accounts offer.
Fee-free bank accounts
While packaged accounts are heavily promoted by banks, the FSA makes it clear that they have not replaced traditional fee-free accounts. In a ‘key message’ section, the report says that ‘firms should make it clear to consumers that they need not purchase a packaged account’. Which? recommended current account providers, such as First Direct, Smile, the Co-operative Bank, Cahoot and Nationwide all offer fee-free accounts, although some require a minimum monthly deposit.
If your account charges a high fee for extras you don’t use, you could be better of switching to another bank.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.