Once derided as overpriced bundles of unwanted insurance, premium bank accounts are back in fashion.
Quietly refreshed by high street banks, today’s paid-for current accounts promise everything from travel cover and phone insurance to cashback, subscriptions and airport lounge access.
The question is whether they finally stack up – or whether the value still melts away once you read the small print.
From poor value to potential savings?
Packaged or “premium” bank accounts typically charge between £10 and £25 a month, and for years consumer groups warned most people would be better off buying cover separately.
But the sums are starting to look different.
James Daley, managing director at Fairer Finance, says the best accounts can now deliver real value. “There are some incredibly good packaged bank accounts out there these days,” he says. “By our calculations, some can offer you hundreds of pounds of value over and above the monthly fees.”
For people who already pay for several types of insurance, bundling can make sense.
“If you are 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,” Daley says.
But that value disappears if the benefits aren’t used. “Others include a range of subscriptions and discounts – and you’ll need to work out whether you’re really likely to get the full benefit from these,” he adds.
The perks that really matter, and those that don’t
Insurance remains the backbone of most premium accounts, and quality has generally improved. “In most cases, the insurances that come with packaged bank accounts are good quality – but that’s not always the case – so it’s worth taking the time to understand what’s covered and what’s not covered before you commit,” Daley warns.
There are also wide differences between providers.
“Barclays, for example, offers a tech add-on for a relatively punchy £17.50 a month – which covers up to four phones and unlimited gadgets,” he says. “But this doesn’t include laptops. Meanwhile, Nationwide’s Flex Plus offers top of the range travel insurance, breakdown cover and mobile phone cover for just £18 a month.”
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Not all perks 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 and compare the combined cost of the monthly fee compared to purchasing the individual perk, like mobile insurance, separately”.
Who actually benefits – and who doesn’t
Sarah Coles, head of personal finance at Hargreaves Lansdown, says premium accounts can be “a brilliant way to access exclusive perks cost effectively. Alternatively, they can be a horrible way to leak 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 this is going to save you money, you need to use the annual cost of the account and compare it to perks you would definitely buy otherwise. If you don’t have any need for mobile phone insurance or a wellbeing service, it’s not going to offer any value.”
Mir agrees that consistency is key. “They work best for people who use the same benefits regularly, such as Avios Points/Rewards, and rarely for people whose needs change from month to month,” he says.
Some premium accounts also offer cashback, preferential savings rates or fee-free spending overseas.
But Cole says: “It’s vital not to assume these stack up against the competition. Often you will find better deals available from online banks and savings platforms.”
Where the small print bites
Travel insurance is where many customers get caught out. Coles urges people to “check the exclusions of perks carefully, to make sure your needs are catered for”, including where cover applies and age limits.
Medical declarations are another common issue. “This includes all sorts of things you may not think of – like past broken bones and conditions like asthma and depression,” she says.
Jenny Ross, editor of Which? Money, says doubling up is a frequent mistake. “A lot of packaged bank accounts throw in insurance products like travel insurance, gadget protection or breakdown cover, but you may already have these elsewhere,” she says.
She also advises regular reviews, saying: “If you do already have a packaged account, try to check in at least once a year to make sure it’s still the right option for you.”
Not a free win
Premium bank accounts are no longer the automatic rip-off they once were, but they are far from a free win. Mir says: “If you can’t clearly say how the account pays for itself, it probably isn’t.”
For the right customer, they can save real money. For everyone else, sticking with a free account may still be the smarter choice.
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