Consumers warned to question “added value”
Current account incentives cost consumers an average of £1.27 per month, according to research by financial research firm Defaqto.
A total of 32 different incentives are currently on offer to those holding added value (paid for) current accounts, including travel insurance, identity theft insurance, card protection, commission free foreign currency exchange, cash back and will writing services.
David Black, principal consultant of Banking for Defaqto, said: “The banks are very keen to migrate their customers from free-in-credit current accounts to added value accounts as the latter provide them with an ongoing and guaranteed income stream. The carrot of incentives is the main method by which banks attract new customers to these accounts. Based on the monthly fees charged, Defaqto has calculated that each incentive costs the customer an average of £1.27 a month.”
Black added that some of the incentives offered, for example travel insurance, are of more value to consumers than others. But he maintained that deciding to transfer to a paid account should be based on whether you actually want the incentives offered. If you do, you also need to ensure you can’t buy said items more cheaply independently.
“Added value current accounts are being increasingly heavily marketed and there is already significant variance in the accounts offered with some providers differentiating between entry level, medium and premium offerings,” Black continued.
According to Defaqto, the average number of incentives offered by added value accounts is just over 11 and the monthly charge for an added value account varies from £3 up to £25. The average monthly cost of such an account is £14.24. NatWest’s Advantage Private Account offers the most incentives (26) and costs £19.95 per month.