Are packaged current accounts still worth it?

As Nationwide downgrades its FlexPlus account, customers need to weigh up value of added extras

Nationwide has announced a major downgrade to its popular £13-a-month FlexPlus current account, leaving thousands of customers wondering whether it is still worth paying £156 a year for what it provides.

The building society started sending out letters this week to customers with the “best buy” packaged account, which comes with decent travel and breakdown insurance, and offers monthly credit interest payments.

However, from 1 November, customers will no longer be paid the 3% interest on credit balances of up to £2,500, which was worth up to £75 a year or £6.25 a month for those who maintained that amount and was, for many, one of the main attractions of the account.

Also being withdrawn is the fee-free £250 overdraft buffer. Instead, those going overdrawn will pay a 39.9% APR interest rate. Gone too is the £5-a-day fee for those straying outside their agreed overdraft limit.

Nationwide says the interest withdrawal reflects the higher cost of maintaining the account, in particular providing family travel insurance, which includes winter sports and golf cover up until the account holder’s 70th birthday. This popular insurance, which could easily cost £120 a year to buy on its own, offers good cover that will help customers in the event that their airline collapses or they miss a flight for reasons beyond their control.

Account holders will continue to receive UK and European car breakdown cover, which provides for two cars for joint account holders and comes with home recovery. To replace this would cost at least £110 a year if bought from the RAC/AA, or £60 a year from AutoAid.

Nationwide, which has nearly 8 million current account holders, has also downgraded its mobile phone insurance by upping the excess paid in the event of a claim. The excess on claims for damaged or broken phones will be £75 for Apple handsets and £50 for other handsets, up from £50 and £25 respectively. If the phone is lost or stolen, the excess will be £125 for Apple handsets and £100 for the rest. In many cases, this makes the cover pointless.

So is FlexPlus still worth it? The short answer is yes, in certain circumstances. If you are a family with dependent children still in school or university, who regularly go on holidays abroad – and in particular head outside Europe or go skiing – then the travel insurance is almost worth it on its own. If you all own expensive mobiles and drive a car then it is doubly so.

However, if you only take holidays once or twice a year – always at home or in Europe – and rarely if ever use your car abroad, there is a case for downgrading to a basic, fee-free FlexAccount instead.

Decent Europe-only travel insurance for a family can be bought cheaply enough at about £60 for an annual policy, or £16 by the week. If you have no children or they have long flown the nest, or you are about to turn 70, or you regularly go overdrawn, there is a strong case to drop the account.

It is a similar story if you have a newish car that includes breakdown cover as part of the warranty.

Account holders should also ask if they are ever likely to claim on the mobile insurance. If you have a basic £100-£150 Android handset, it will probably not be worth claiming, particularly when you find out the insurer will not pay out in cash. If you claim, you will soon discover the insurer insists on repairing your handset itself, or sending you a replacement – which can take weeks to arrive – and by which time many people will simply have gone out and bought another phone.

On the plus side, FlexPlus account holders will continue to be able to make fee-free cash withdrawals worldwide, which could be worth £40 a year to frequent travellers. Those ditching the account could buy a Caxton FX prepaid card instead and retain the same benefit.

Chris Rhodes, an executive director at Nationwide, defended the changes. “As a mutual, Nationwide is not driven by profit. However, we are not immune to inflationary pressures and we need to make some essential changes to our FlexPlus account,” he said.

“Members tell us that the quality of the insurances and the monthly fee are the most important aspects of a packaged account, which is why we have improved some of the insurance benefits and maintain[ed] the monthly fee, rather than retain the interest rate.”


Miles Brignall

The GuardianTramp

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