Most banks now offer current accounts with added ‘extras’ in exchange for a monthly fee. This is Lloyds TSB’s top of the range version, claiming to offer extras worth up to £1,156 for a total annual fee of £300 (£25 monthly). Plus, if you select the ‘Vantage’ option you could also earn interest of up to 4% gross AER, an exceptionally attractive rate.
To find out whether this is too good to be true we need to consider the real value of the ‘extras’ along with interest rates and costs.
Extras
Lloyds estimates the value of its added extras at up to £1,156. However, this assumes that you pay top whack for just about everything. As the table below shows, a more realistic estimate of their worth is £464, still impressive for a £300 fee. But ask yourself, would you really normally spend hard earned cash on items like mobile phone insurance, identity theft protection and having banking details sent to your mobile?
The one extra most would benefit from is travel insurance. You can buy a similar policy for around £70, falling to about £50 if you don’t need winter sports cover (even less if no children). If you don’t have breakdown cover included with a warranty on your car then this too is probably worthwhile, although a good non-AA policy can be had for as little as £34. Home emergency cover, worth around £80, may be beneficial for some but I think all the other extras are either worthless or unlikely to be worthwhile for most people.
So, by my reckoning, you’re paying £300 for less than £200 worth of potentially useful extras – not a great deal.
| Extra | Lloyds TSB’s Estimated Worth | Candid Money’s Estimated Worth | Value of Extras Candid Money believes could be worthwhile | Notes |
|---|
| Travel Insurance | £283 | £70 | £70 | Shopping around can provide similar cover a fraction of the price |
| AA Breakdown Home Start | £213 | £34 | £34 | Ditto, the comparative cover is not quite as comprehensive, but still covers recovery, homestart and relay per vehicle |
| Mobile Phone Insurance | £216 |
£90 | £0 | Cover shown is for three mobiles. Check whether covered by your household contents insurance |
| Sentinel Card Protection | £20 |
£20 | £0 | Provides cover for lost/stolen cards, but your liability will rarely be more than £50 per card anyway |
| Interest Free Planned Overdraft | £119 | £119 | £0 | Lloyds TSB assumes a £750 overdraft for 1 year and compares the cost to their most expensive rate. Would you ever be overdrawn by that much for so long? |
| Airmiles Travel Service | £0 | £0 | £0 | You get this anyway with an airmiles card |
| Airport Lounge Access | £32 | £0 | £0 | Only on holiday bookings through Lloyds TSB travel service, which may not offer the cheapest deal anyway |
| Airport Meet & Greet | £40 | £0 | £0 | Ditto |
| Mobile Banking Pack | £30 | £30 | £0 |
Do you really need updates sent to your mobile? |
| Home Emergency Cover | £100 | £80 | £80 | Of debatable value, but could be worthwhile for some |
| ID Aware | £83 | £21 | £0 | Identity theft is growing, but it's nowhere near as prevalent as banks would like you to believe when they try to sell monitoring and insurance |
| Save my numbers | £20 | £0 | £0 | Why not just backup your mobile contacts onto a PC or cheap sim card backup gadget? |
| Total | £1,156 | £464 | £184 | All costs shown annually |
Interest
The standard rate of interest is 0.1% - awful. But if you stay in credit and pay in at least £1,000 each month you can choose the ‘Vantage’ option, which pays 2% if your balance is over £1,000, 3% if over £3,000 and 4% if over £5,000 (up to £7,000).
4% is a great rate, but you could get around 3% in a competitive savings account, so the extra 1% is worth £70 a year before tax on a £7,000 balance, equivalent to £42 for a higher rate taxpayer.
Charges
If you slip into the red without first agreeing an overdraft then you’ll be hit by the types of bank charges that have been causing so much controversy – a monthly fee of £15 and a daily fee of up to £20. In fairness the overdraft interest rate is a lower than average 10.4%, but any interest you end up paying will likely be dwarfed by the fees. More attractive is the offer of an interest free authorised overdraft of up to £500, although it’s actually only worth up to £4.27 of saved interest payments per month (assuming 10.4% EAR, or £7.20 assuming 19% EAR).
All in all I think most people will struggle to derive £300 worth of genuinely useful benefits from this account. If you really do want all the various insurances and services on offer then you’ll be a happy camper, especially if you have a long term authorised overdraft too. But if you’re fairly pragmatic and don’t mind shopping around you’ll probably find this account poor overall value for money.
It’s interesting that research company defaqto gives this account a five star rating. Their review methodology is obviously quite different to mine!