Are premium bank accounts worth it and what are their advantages and disadvantages?

Once ridiculed as overpriced bundles of unwanted items Insurancepremium price bank accounts Are back in fashion.

Quietly fresh from the high street banksToday’s paid current accounts promise everything from travel cover and phone insurance to cashback, Membership and access to airport lounges.

The question is whether they ultimately stack up – or whether the value melts away even after reading the small print.

From poor value to potential savings?

Packaged or “premium” bank accounts typically charge between £10 and £25 per month, and for years consumer groups have warned that most people would be better off buying cover separately.

But the amounts have started appearing different.

James Daly, managing director of Fairer Finance, says the best accounts can now offer real value. “There are some incredibly nice packaged bank accounts out there these days,” he says. “According to our calculations, some may be offering you hundreds of pounds worth of money on top of the monthly fee.”

For those who already pay for multiple types of insurance, bundling may make sense.

“If you’re already buying annual travel insurance, breakdown cover and gadget insurance, it’s likely that many packaged accounts will offer a cheaper deal than buying these separately,” says Daly.

But that value disappears if the benefits are not used. He adds, “Others include a range of memberships and discounts – and you will need to find out whether you are really likely to get the full benefit of these.”

The features that really matter, and the ones that don’t

Insurance remains the backbone of most premium accounts, and the quality has generally improved. “In most cases, the insurance that comes with packaged bank accounts is of good quality – but this is not always the case – so it is worth taking the time to understand what is covered and what is not covered before you commit,” warns Daly.

There are also wide differences between providers.

“For example, Barclays offers a technology add-on for a relatively attractive £17.50 a month – which covers up to four phones and unlimited gadgets,” he says. “But it doesn’t include laptops. Meanwhile, Nationwide’s Flex Plus offers best-in-class travel insurance, breakdown cover and mobile phone cover for just £18 a month.”

Not all amenities justify the fee. Zohaib Mir, financial planner at EQ Investors, says: “Benefits like concierge services, discounts and early ticket access sound exciting but usually don’t save much money in real life.”

His advice is to “try to compare the combined cost of the monthly fee compared to purchasing individual benefits such as mobile insurance separately”.

Who really benefits – and who doesn’t

Sarah Coles, head of personal finance at Hargreaves Lansdown, says premium accounts “can be a great way to get exclusive benefits cost-effectively. Alternatively, they can be a terrible way of leaking cash from your current account in exchange for things you don’t need or can’t use.”

She says the only way to judge value is to be ruthless. “To calculate whether it will save you money, you need to use the annual cost of the account and compare it to the benefits you would otherwise surely buy. If you have no need for mobile phone insurance or any welfare service, it will provide no value.”

Mir agrees that continuity is important. “They work best for people who regularly use the same benefits, such as Avios points/rewards, and rarely for people whose needs vary from month to month,” he says.

Some premium accounts also offer preferential cashback savings Rates or duty-free expenses abroad.

But Cole says: “It’s important not to count it against the competition. Often you’ll find better deals available from online banks and savings platforms.”

where small print bites

Travel insurance is where many customers get stuck. Coles urged people to “check allowances’ exclusions carefully to ensure your needs are met”, including where cover applies and age limits.

Medical announcements are another common issue. “This includes all kinds of things you might not even think about — like past broken bones and conditions like asthma and depression,” she says.

Jenny Ross, editor of Whose? Doubling the money, they say, is a frequent mistake. “A lot of packaged bank accounts put in insurance products like travel insurance, gadget protection or breakdown cover, but you may already have these elsewhere,” she says.

She also recommends regular reviews and says: “If you already have a packaged account, try to check in at least once a year to make sure it’s still the right choice for you.”

no free wins

Premium bank accounts are no longer the automated fraud they used to be, but they are far from free wins. Meir says: “If you can’t clearly say how the account pays for itself, it probably doesn’t.”

For the right customer, they can save real money. For everyone else, sticking with the free account may still be a better option.

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