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UK current accounts: not the full package

26th September 2005

Alliance and Leicester research has shown that paid-for packaged accounts offer poor value.

While Britons pay up to GBP200 a year in fees for packaged current accounts, new research from Alliance and Leicester has shown that few customers make good use of the facilities offered. However, while these accounts may indeed not suit everyone, they do bring with them a raft of secondary benefits that this research may have underestimated.

Packaged accounts typically offer additional services such as a number of insurance products, roadside assistance and discounts on other financial products. However, Alliance and Leicester's research shows that only two in five holders take advantage of these benefits.

The research shows the main reason for customers having a packaged account is because the bank suggested it rather than the benefits offered. While only half of packaged account holders think their account offers good value.

Alliance and Leicester's Premier Plus account undoubtedly offers good value, by the simple fact that it is free. The account offers 5% credit interest compared to 0.1% offered by some of its paid-for rivals and offers a better deal on overdrafts. However, the account does not offer many of the other additional benefits.

Packaged accounts have been referred to as 'a nice little earner for the banks', but yet they still remain massively popular with customers. It should be noted that these accounts are often held by relatively high earners who are cash rich and time poor, so have little time to shop around for deals on insurance and other products and value a 'one stop shop'. These customers also value the improved relationship with their bank that these accounts often offer. However, for customers who do not take full advantage of these accounts they are little more than an expensive status symbol.

These accounts are here to stay because they offer banks a means to raise revenue on their generally unprofitable current account books. It is also thought that customers with these accounts are more likely to broaden their relationship with a bank and are less likely to switch account provider, making them invaluable to a bank.

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