According to regulator, the Financial Services Authority (FSA), more than one in five of us have a packaged current account that charges a monthly fee in return for benefits such as mobile phone cover, travel insurance and breakdown cover. Fees are typically around £10 a month, but can be as high as £25.
For some people these accounts represent good value for money and convenience, particularly if they make use of all the benefits on offer. But in other cases customers may find that the insurance cover they have paid for is useless – for example, if they have breakdown cover, but have never driven a car, or if they have travel insurance, but are too unwell to go abroad.
If you think you might have been mis-sold a packaged account, here’s our step-by-step guide on how to claim back the monthly fees….
How do I know if I have been mis-sold a packaged account?
If you were moved to a packaged account and weren’t informed by your bank, then you may have been mis-sold.
You may also have a case if your bank didn’t inform you that there were alternative free accounts that you could apply for, or if you were told you were eligible for an insurance policy offered with the account when you weren’t.
For example, if you were sold a packaged account with travel insurance which had an age limit and you are older than this limit, you are likely to be eligible for compensation.
Bear in mind that many cases won’t be clear cut, particularly if it is only one element of the account you aren’t able to use, but if you regularly use all the other benefits offered.
However, if you feel you have been paying for an account which is inappropriate for your needs, or if you weren’t even aware you had a packaged account, it is still worth raising a complaint as soon as possible.
Who should I complain to?
Your account provider should be your first port of call. Set out in writing why you think you were mis-sold the account, and how much you have paid in fees.
If your bank or building society turns down your claim, or if they haven’t responded to you within eight weeks, you can take your complaint to the Financial Ombudsman Service. This service is free to use, and the Ombudsman will decide whether or not the account was inappropriately sold. If it rules in your favour, then the bank should refund all the fees you have paid.
Remember that complaints to the Ombudsman can take up to a year to be settled, so even if you have been mis-sold, you may not get your money back for some time.
Which free accounts should I then be looking at?
If you don’t want to pay a monthly fee for your bank account, then there are plenty of ‘free’ accounts available, many of which still offer attractive benefits.
The Nationwide FlexAccount, for example, comes with free multi-trip annual European travel insurance for customers aged up to 74, as well as a three-month interest-free overdraft. You must pay in £750 a month for at least three consecutive months to qualify for this account.
Other accounts which don’t charge a monthly fee and are worth a look include First Direct’s 1st account which offers a free £250 free overdraft.
Halifax’s Reward Current Account is also worth considering, as it gives customers paying in at least £1,000 a year a bonus of £5 a month – equivalent to interest of £60 a year. And if you switch to the account between now and March 3, you will receive £100 cashback.
However, this account won’t suit those who regularly slip into the red, as the overdraft charges are steep. You will be charged daily fees of £1 for arranged credit of up to £2,500, £2 for arranged credit of above that amount and £5 for unauthorised borrowing.
There are changes afoot for Halifax current accounts however, which you can read more about in Rachel Wait’s article.
Accounts with a fee
Although Santander’s 123 current account has a low £2 monthly fee, it provides customers with cashback, so you earn 1% back on water, council tax and Santander mortgage payments of £1,000 or less, 2% on gas and electricity bills and 3% on mobile, home phone, broadband and paid for TV packages.
This account also pays savers interest, but you need to agree to pay in at least £500 a month, set up two direct debits and maintain a minimum balance of £1,000 to qualify.
If you are able to meet these criteria, then with a rate of 3% paid on balances from between £3,000 up to £20,000, returns are again higher than any easy access savings account currently on the market.
Balances between £2,000 and £3,000 earn a lower rate of 2.00% AER, while if you have between £1,000 and £2,000 in your account, you earn 1.00% AER. You won’t receive any interest on balances below £1,000.
Bear in mind also that M&S Bank is currently offering £100 of its own gift vouchers to customers who switch to its M&S Premium Current Account with insurance, or the M&S Premium Current Account without insurance, between now and February 28. The accounts do come with respective fees however of £20 and £15.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.