Top packaged bank accounts

For some, travel insurance, smartphone cover and a breakdown policy for a fixed monthly fee won't be worth it. But if you're savvy enough to check policies and work out costs, they can SAVE you money. There's a simple way to work it out:

If you don't need the insurances, or can insure cheaper elsewhere, don't bother with a packaged account.

Start by multiplying the monthly cost of the account by 12 – for example, £15/month is £180/year – then see if you can buy the 'freebies' for less. To help, see our Travel Insurance, Breakdown Cover and Mobile Insurance guides. The policies included with packaged accounts are deliberately high-end, so compare whether a decent standard policy covers what you'll need.

If you'd make a saving, a packaged account might be worth it for you. If you wouldn't, paying for cover separately and plumping for a fee-free bank account could work better.

With most packaged accounts you can max the value by opening it as a joint bank account. Doing it this way means you're both covered, for the same fee. So even if you won't both use the account, adding a partner can make sense – though be aware that joining finances means their credit record can affect yours.

You should still consider what policies you actually need, and whether you could get them cheaper elsewhere, but if you both travel worldwide, own cars and have smartphones, a packaged account could save you money.

A warning about joint finances

Only do it if you're in a financially trusting, caring, non-abusive relationship. Don't ever feel pressured by a partner into getting a joint account, it can sadly be a precursor to financial abuse – a form of domestic violence. For help and info, see Martin's Financial abuse & joint accounts blog.

If the account won't pay out when necessary, it's worthless, so always check you're covered for what you need before signing up.

Plus always watch out for upgrade charges. If winter sports and family cover aren't included, adding them can have hefty costs and you could find you're spending far more than you need to. Instead, choose a more suitable account to begin with, or save by insuring separately.

And once you do sign up, always make sure you check the policy documents carefully. 

Failing to declare conditions when applying for an account – and therefore, the travel insurance cover, too – may invalidate the policy. You need to contact the insurer and tell it, even if you're just having tests for a condition.

If you have a pre-existing condition, one of three things will happen:

• You’re covered as standard

• You’re covered, but for an additional premium

• You’re not covered for that condition

Even where there’s an extra premium, it can still work out cheaper than standalone travel insurance, so it’s worth checking.

When will you find out if you need to pay extra?

In many cases you won’t get a clear “yes/no (and price)” until you’ve completed the insurer’s medical screening – often meaning you only find out the cost after opening the account. Nationwide FlexPlus is an exception as it refers you to Aviva to get a quote before you complete the switch, so you can decide whether to proceed.

A practical switching tip if you’re likely to be charged extra

If you think you’ll need to declare a condition (and you’re unsure what it’ll cost), set your switch date two to three weeks ahead so you’ve time to get the insurer’s decision/price. If it’s not a good deal, you can cancel the Current Account Switch Service up to seven working days before your switch date.

See our Travel insurance for pre-existing conditions guide for more info.

This guide's about how to pick the best packaged account. But it's worth noting that many people have had them for years without being able to use the benefits, essentially because they were mis-sold the account.

If that's you, see our Reclaim packaged account fees guide. Everyone who pays a monthly account fee should check to see if they were mis-sold.

What counts as mis-selling?

Full information can be found in our reclaim guide, but this could apply to you if you were pressured into getting a packaged bank account without being given full information (for example, you may have been told it was a requirement to getting a mortgage or overdraft), or that there were no other suitable bank accounts you could open instead. The fee may also have been added without your knowledge or consent.

If you're opening a new bank account, keep an eye out for whether there's a monthly account fee and whether there are any linked insurance products – these are usually indicators that it's a packaged bank account.

Those who feel they have been mis-sold can follow steps to reclaim their fees plus interest. This usually starts by contacting your provider. If you're then not happy with their decision, you can escalate the complaint to the Financial Ombudsmen Service.

To get a packaged bank account you typically have to be over 18 and live in the UK. There may also be other eligibility requirements concerning the different types of insurance you're signing up for. 

Many packaged bank accounts come with travel insurance, for example, which can come with exemptions for pre-existing conditions or a maximum age limit. Similarly with gadget insurance, there may be limits on what you can insure, its value and its age. 

Specific providers may also ask that you don't have existing insurance policies or an existing packaged bank account when you sign up. See our best buys for more information on individual providers and our How to open a bank account guide for general info.

Banks use the same credit-scoring procedures – where they assess whether they want you as a customer – for packaged accounts as they do with normal accounts and credit cards.

So if the account includes an overdraft you'll be credit-checked in the usual way. For more info on how this works, and what lenders are looking for, see Credit Scores.

The personal savings allowance (PSA) means you can earn up to £1,000 from savings interest without paying tax. However these reward payments don't count as savings income for tax purposes and instead are classed as 'annual' or 'miscellaneous' payments. This means the rewards don't count towards your PSA, and they're still liable to be taxed.

If you're a non-taxpayer, you should claim back any tax taken using the R40 form. Higher and additional-rate taxpayers may need to pay more via tax returns.