Packaged accounts – who benefits?
New research from USwitch has brought packaged accounts under the spotlight. It seems that 1.3 million people believe their current account has been automatically upgraded, while one third of consumers upgraded their current accounts on the bank’s advice. These ‘upgraded’ accounts generate fees of £530 million each year and allow banks to cross-sell other financial products, such as overdrafts, savings accounts and credit cards.
One in four packaged account holders do not use the perks as they already have them with another account. And many of the perks are not free, so account holder have to pay extra for the privilege of being upgraded.
Nick White of USwitch said that effectively customers are paying to have more products sold to them. He added: ‘From a consumer’s perspective, it’s all too tempting to have several financial products with the same provider and as a result of this, banks are profiting from people’s inertia and lack of time to shop around for the best deal. Just because banks claim to offer customers a discount if they take out additional financial products it doesn’t mean it’s a best buy deal or the best option for the individual.’
He added that while persuading customers to upgrade might be acceptable ‘but if banks really are automatically upgrading people to a fee paying account it could be described as unethical.’