Is it ever worth paying for a bank account?

photo thanks to dullhunk on flickr

Remember when paid-for bank accounts were the exception rather than the norm? The preserve of the rich, or posh, or impressionable? Of course now that the banks are also ‘suffering’ as a result of the economic crisis, free banking is getting harder to find, and banks are now offering the best interest rates and deals on accounts that carry fees in an attempt to woo us over. In addition to the obligatory travel insurance.

But is it worth it? New research carried out by the data firm Defaqto has found that the average interest paid on a fee-charging account that is kept in credit is now 0.56% a year, against 0.34% for accounts with no fees. Similarly, the average rate charged on authorised overdrafts, where you do not exceed your agreed limit, is the lower 14% for fee-charging accounts, but14.9% for fee-free accounts.

Assuming a monthly fee of £9.99 for a paid-for account, you would have to have a credit balance of almost £54,500 to earn back £119.88 in extra interest back in a year. And if you were overdrawn? You’d need to find a bank that would give you a whopping £13,320 limit.

But if you could bag yourself one of those rewards, like the £100 Santander started offering a to those who switch to one of its accounts charging £10-£20 a month, maybe it would be worth it? Well if you have a credit balance of £9,091 or an overdraft of £2,222 it would be. For a year.

But what about the travel insurance? That’s got to be worth £120 a year hasn’t it? Er, no. Annual travel insurance policies for a couple in their thirties start at under £70 for worldwide travel. And if you are cutting back on the number of trips or only travelling to Europe you can likely get it cheaper than that.

But what about the other deals you can get? Well, some banks will offer you a discount on their other products, like car or home insurance. And with the cost of these products rising astronomically, a 10% or 15% discount could actually be worth a lot. However, this does rather assume that you would take your car or home insurance from your bank, when in practice, they are often far from the cheapest.

So overall, fee paying accounts are a fantastic deal. For the bank. Did you ever doubt it?


  • Naomi
    It is sometimes worth it. I got £900 off my mortgage fee with my paid-for current account, so with that and the other benefits it will take a while for it to balance out.
  • Ian
    I get breakdown cover, plus insurance on purchases too.
  • Len D.
    This is an interesting article as it makes you consider whether these benefits are actually worthwhile. Mrs Dastard and I pay £12 per month on our account meaning we pay £144 a year. We get: AA breakdown (in our car or someone elses), phone insurance for us both, travel insurance for us both, 4% interest on balances up to £7,000, small amount of grace period if going over the overdraft, £100 interest free overdraft and also an overdraft "buffer". I am not sure I could get my phone insured for £5 a month. However, I would not be so sure that this is great value if we were not both benefitting from it.
  • Andrew
    £144 a year for travel insurance, AA cover, mobile phone insurance and a years extra purchase insurance seems like an ok deal. You might be able to do better with Quidco + changing providers each year but would it be worth all the time in canceling contracts etc?
  • Carl
    Yes, i get "Private Banking" printed on my debit card, making the £20 per month worthwhile
  • Marek
    My account is actually pretty good value. Travel insurance, breakdown cover, phone insurance, extended warranty on electrical goods, laptop insurance plus some other crap for £15 quid a month. I've used all the services mentioned in the last 12 months.
  • Yue
    Free travel insurance in Europe for a free account with nationwide. I do despise the interest rates not being passed on to saving and extortionate for loans etc. Take your money out of the banks and make a statement against such poor service.
  • Tim
    Nationwide's travel insurance is annoyingly only Europe. No use to me so I have to buy annual worldwide insurance anyway (which covers skiing also). Costs as little as £40, but you shouldn't look at travel insurance based on price alone. What cover do you actually get, is it right for your needs? Check the reviews on claiming as many of the cheap ones are awful. I get a chunk of interest free overdraft on top of the basic buffer on my account, but I don't use it these days. The breakdown cover I should look into. They introduced it more recently but I've been with the RAC for some time. Does the bank's cover provide enough though or is it just basic cover? I need to check. The phone insurance when they originally launched it didn't cover the more expensive smartphones, but I need to check what they cover now. Will writing service is provided also and it's the kind of thing I just put off doing. The stuff for loss of cards I signed up for but I never get round to updating it and it's way out of date now. Simply put, I pay for the account but barely use the services due to my own laziness and the hassle it is to contact them and do research required.
  • Dick
    I put any excess money I have that I think I might need in the short term into an easy access savings account with a better interest rate. Anything above this gets invested for longer term. Average interest, or lower, is for mugs.

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