Consumers warned to avoid fee-paying accounts
Consumers paying fees for packaged bank accounts get little value for money compared with customers of free accounts, according to comparison site MoneyExpert.
Research from the website found that the average credit interest rate on packaged accounts is just 2.1% , 0.2% more than the average rate available through free banking, which is 1.9 %. Furthermore, according to MoneyExpert, the average monthly fee of a packaged account is £11.61, with some accounts charging as much as £25 per month.
More than half of all packaged accounts pay less than 2.5% AER on positive balances, with 23 of the 63 accounts available paying 0.25% or less. The website’s figures also showed that there are 37 free current accounts on the market, paying 2.5% or more.
Sean Gardner, chief executive of MoneyExpert, said: “Banks do offer customers significant incentives for signing up to a fee-paying current account. Typically you can expect free travel insurance, better savings rates, free gifts and a dedicated personal adviser. But often there are many benefits included which customers should be able to find elsewhere anyway, such as commission free travel money, cheap credit card deals and payment protection insurance.
“The basics of a typical fee-paying current account are frankly terrible value for money. You don’t have to be a mathematician to see how an average interest rate of just 2.1% compares to free banking if you have to pay a typical fee of £11 for the privilege.”