Money Insider: Added-value bank accounts can pay off

The arguments surrounding the end of free banking and accounts with monthly fees are doing the rounds again, fuelled by the recent product announcement from M&S Bank, soon to be the newest bank on the high street.

Customers can register now for M&S Premium Current Accounts ahead of the official launch in October.

There are two accounts to choose from, but neither is free. You'll have to stump up £15 a month to obtain a range of M&S-themed benefits, rewards and discounts, or £20 if you want comprehensive, worldwide, multi-trip travel insurance included too.

Last November the Financial Services Authority (FSA) announced new rules to protect customers with a packaged or "added-value" current account.

Under the proposals, customers must be checked to ensure they are eligible for the individual insurance elements within the package of benefits, and they will receive an annual statement to check that the product remains suitable for their needs

This was seen as a welcome, albeit long-overdue, move by the City regulator, and should prevent these fee-paying accounts being sold to people who won't make sufficient use of the component parts to make them financially worthwhile.

Packaged accounts frequently receive negative press due to reports of accounts being sold to customers without their consent or without a full explanation of the benefits.

So when the Financial Services Authority made its announcement last year, there was the inevitable outcry from consumer groups branding all these products as little more than moneyspinners for the banks and a waste of money for account holders.

While I agree that the practice of selling these accounts to customers without checking suitability needs to be stamped out, when it comes down to the value of these accounts, not all products are the same – far from it.

For example, the NatWest Select Silver account includes European travel insurance (if aged over 70 you pay an extra £50 a year), mobile-phone insurance (one phone per account holder) and identity-theft insurance, plus five music track downloads and three DVD rentals a month – for a total monthly cost of £8.

In comparison, you might think the Privilege Premier account from Co-operative bank, at £13 a month, looks expensive, but before dismissing it out of hand, take a closer look at the package of benefits.

For a start there is a £300, interest-free and fee-free overdraft facility which can be worth up to £4.50 a month on its own.

Then there is RAC breakdown cover for the UK and Europe, worldwide (not just European) multi-trip travel insurance, including volcanic ash situations, with cover up to age 79.

The mobile-phone insurance covers up to four smartphones in the family, and you can choose one additional benefit from the traveller, gadget or safeguard categories.

It's also worth looking at the cost of some of the cover if you were to buy it from a stand-alone provider. For example, insuring a single iPhone with Vodafone costs £12.99 a month. While the NatWest account may be more suitable for some customers, my point is that even though some accounts initially appear more expensive, the package of benefits can far outweigh cheaper alternatives, and the extra £5 a month for the Co-operative account is actually good value for money if you're going to make use of most of the elements on offer.

It's likely that the new current accounts from M&S Bank will be shunned by many purely because of the fee

However, those who are already big fans of this highly trusted retail brand when it comes to shopping for food, clothing and household goods will be first in the queue to take advantage of the banking benefits on offer.

Excellent low rate mortgage deals if you've got a decent deposit

The rates on fixed rate mortgages are being slashed by some of the biggest players in the home loan market. This is excellent news for those who are looking to reduce their monthly outgoings, however the downside is that these deals are only on offer to borrowers with a 30% or 40% stake to put towards the purchase price.

HSBC was first out of the blocks with a record low five year fixed rate of 2.99 per cent with a £1,499 fee for advances to 60 per cent LTV. This was quickly mirrored by Santander at the same rate and LTV and £1,495 fee.

On Wednesday, Barclays announced a new best buy two year deal priced at 3.29 per cent and no product fee for borrowing up to 70 per cent LTV.

Whether these new low rates are down to the Government's new 'funding for lending' scheme or falling Money Market costs it's great news for borrowers.

Let's hope the cheaper borrowing offers are soon made available for those with smaller deposits too.

a.hagger@moneynet.co.uk