Would you credit it? Fee banking can pay

New-style accounts offer plenty of perks, but it's the overdraft deals that count

Who Says we aren't prepared to pay for our banking? Barclays Bank last year launched the first of a new breed of current accounts charging a monthly fee and, while retaining its standard free-if-in-credit account, has nevertheless attracted more than a quarter of a million customers for Additions, the new account.

Certainly this number is dwarfed by the total of 7 million account-holders signed up with Barclays. But the take-up should be seen in the context of the much-repeated statistic that individuals are more likely to change their life partner than their bank account.

So do these and similar accounts have something after all? Holders of a Barclays Additions account pay a pounds 6 a month flat-fee. In return, they receive a bundle of benefits including pounds 5,000 life assurance, a will-writing service, telephone banking, discounted children's health care, free goods insurance, a higher cheque guarantee limit, and perhaps most importantly a fee-free overdraft. According to Barclays, a customer making full use of Additions stands to save up to pounds 240 a year.

But it should be noted that many of the features of this package are available for little or no cost elsewhere. Barclays has been mailing its customers an offer of pounds 5,000 of free life cover for several months. The phone banking service, Barclaycall, is free to all Barclays customers, and current account holders already have a pounds 50 overdraft "buffer zone": up to two days in the red each month will not lead to a huge bill.

The most valuable part of the Additions package is probably the overdraft, and this is what Barclays uses to calculate much of the potential savings. The first pounds 100 is automatic and free of all charges. Higher overdrafts have no usage fee. By contrast, ordinary account holders pay pounds 5 a month for overdrafts outside their buffer zone. Additions customers also have a two-day grace period if they exceed over-draft limits without authorisation.

The two other services that could be worth while are the free will-writing service and the account's legal helpline. Barclays estimates the cost of a "mirror" will for husband and wife at pounds 94 and the potential savings from the legal help-line at up to pounds 100 an hour. Even so, legal help is available elsewhere, with a growing number of insurance or home assistance packages and even some credit cards.

The other high-street banks are watching Barclays' moves with interest, but so far few have opted for a mass-market, added-value account.

Most banks operate an upmarket service for selected customers: NatWest offers its Advantage Premier and Advantage Gold accounts, by invitation only; Lloyds Bank offers its Gold service, the Midland has Meridian. There are also the specialist banks, such as Citibank, which offer a range of added-value services to clients prepared to put between pounds 20,000 and pounds 30,000 a year through their accounts.

At the moment, the closest rival to Barclays' Additions is TSB Select, launched in January. TSB says account-holders can save hundreds of pounds by buying through the home shopping service linked to the account, assuming the product you want is available. It gives a saving of pounds 78.73 on a Kenwood hi-fi system and pounds 30 on a Hitachi television as typical examples.

For this, and the account's more mundane banking services, customers pay pounds 3 a month. Other benefits include a pounds 50 interest-free and charge-free overdraft and also commission- free travellers' cheques. Like Barclays, TSB also gives some free life assurance, a card cancellation hotline and a legal advice line. Unique, but of less immediate financial benefit, are an event reminder service (nominate 10 key events and the bank will remind you of them) and a special key fob with a Freepost return address, so that people finding your keys can return them, but not discover your address.

Not all banks are convinced that customer charges are the way forward, even if they are linked to added-value services. Abbey National points out that its current account, relaunched last year, has no fee for authorised overdrafts, has telephone banking and a pounds 100 cheque limit with its multi- function card, and higher rates of interest than rival accounts on balances which are in credit.

Midland also believes that simple is best. It has scrapped the monthly fee for agreed overdrafts and reduced the interest rate on its standard Bank Account; there is also a pounds 50 buffer zone for unexpected overdrafts. But beyond that it has increased charges for people who become overdrawn without notice, to a pounds 25 monthly fee and a monthly interest rate of 1.85 per cent.

Barclays admits that some of Additions' added value services are available free or at low cost elsewhere. That said, it is the "free", or more realistically, fixed-cost, overdrafts that stand out in Barclays' and TSB's literature. Market research by the banks and converting building societies points to overdraft charges being a common source of customer dissatisfaction with their banks.

It could well be that by, in effect, rolling overdraft charges into one, general-purpose fee, the banks are providing a spoonful of sugar to account-holders who have some trouble swallowing their financial medicine.