The phrase ‘package deal’ probably conjures up images of intoxicated, red-faced Brits on their merry way to some part of the Mediterranean. There are, however, other services besides the tourism industry, where you can get a number of so called benefits all rolled into one charge.

Packaged current accounts, while not the most popular form of bank account, offer customers benefits such as travel insurance, phone insurance and in some cases, an emergency cash service, all for a monthly cost. A number of packaged accounts, namely those at Lloyds TSB, Nastwest and RBS, have recently had those monthly charges increased, which has caused many people to believe that these banks are trying to increase revenue ahead of the result of the Office of Fair Trading (OFT) test case, which they are involved in, later this month.

Six banks, namely, Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds TSB Bank plc, Royal Bank of Scotland Group plc, and Nationwide Building Society have been investigated by the OFT for unfairly charging customers for going over their overdraft limit. The ruling on whether or not the charges are unfair, will determine whether or not banks will have to shell out more compensation to customers, or be entitled to claim back some or all, of the refunds it has already dished out.

Who’s who?

Lloyds TSB has recently increased the cost of its Gold and Platinum accounts by £2 per month, bringing the cost up to £12 and £17, respectively. Its Select account has increased by 95p. Such increases were implemented due to customers wanting more benefits, says Beth Longcroft, spokesperson for the bank. “Customers told us they would value additional benefits, particularly for their mobile phone, which is why we have added the “Save My Numbers” service and increased the mobile phone cover up to £2,000 per handset,” she explains. “We are also offering customers Airmiles when they book their holidays through the Lloyds TSB Airmiles Travel Service, alongside an Airport Meet and Greet service.

“To cover the cost of these new benefits, we have increased the cost of the Gold and Platinum accounts by £2 per month (and the Select accounts by 95p). It’s important to remember that we haven’t increased the cost of Gold or Platinum in four years, since May 2004. The price of the Select account hasn’t been changed since May 2005.”

RBS and Natwest (which is owned by RBS) have also increased the fees for their Royalties Gold and Advantage Gold accounts, by 95p per month to £12.95 per month. The accounts now offer new car breakdown cover, improved travel insurance and an emergency cash service. Nigel Owen, spokesperson for Natwest and RBS, says that any price rises came as a result of customer feedback.

“The packaged accounts now offer our best ever potential savings for customers with the addition of these new features, this has been reflected in modest price rises.

“NatWest Advantage Gold / RBS Royalties Gold will increase by 95p per month to £12.95 (annual fee £155 annually). This is the first increase for Advantage Gold in two years, and the first in over three years for Royalties Gold. The extra £11.40 per year is more than covered by our new car breakdown cover which is worth £69 alone.”

Hidden agenda?

David Black, principal banking consultant at Defaqto, says that it is certainly not unusual for banks to revise their current account charges and in light of pending litigation with the OFT, it’s not surprising that they’re trying to get money from elsewhere. He says: “Given the almost certain continuation of litigation over unauthorised overdraft charges it’s likely that we’ll see significant changes in current accounts over the next few years.

“My opinion is that unauthorised overdraft charges will ultimately be capped and that the banks will inevitably seek to recover such lost income elsewhere. This may result in the end of free in credit full service current accounts per se and may see the model move to a ‘pay as you go’ or a flat fee basis. In some instances it is likely that such fees may be reduced or waived if the customer has other specified products with the same bank. Against this backdrop, I expect the banks to place even greater emphasis on selling their added value current accounts.”

Kevin Mountford, head of current accounts and savings at price comparison site Moneysupermarket, says that banks are keeping a step ahead of the OFT’s ruling. “Banks are already trying to be creative with getting back some of their lost margins. Those who have put up the prices on their current accounts could have done so now, because to do so closer to the OFT’s ruling would be a bit too telling,” he says.

A part to play?

Mountford adds that packaged accounts certainly have a part to play in the market. “Take HSBC’s packaged account for example,” he says. “If you hold this account, you can get discounts on other HSBC products.”

However, customers, should always consider whether the relevant charge is worth paying – that is, if you never see yourself using the benefits, then there’s no point in paying something for nothing. “Consumers should always ask themselves if the cost matched the value of the benefits. These accounts are often pushed and sold without enough consideration given to the customer, so always bear in mind what you’re getting for your money and if you think you will actually benefit from it,” Mountford concludes.

There’s no doubt that car insurance, travel insurance, mobile phone cover and an emergency cash service could be of use to many people. If you think the most cost efficient way of accessing these services is through a packaged current account, then there’s no reason why you shouldn’t go for it. If, on the other hand, you either already have insurance, deem yourself reliable enough to never to have to avail of an emergency cash service, or just aren’t that bothered, then you’re probably better off sticking with your no-frills bank account. There is, after all, something to be said for simplicity.

Data from the financial comparison site has revealed some accounts accept minimum deposits of just £1,000 and rates can be just as competitive as onshore accounts. For example, Kaupthing Singer & Friedlander (IOM) offers a no-notice account at a rate of 6.65%, which requires a £1,000 deposit, while Alliance & Leicester International’s no-notice eSaver Offshore pays 6.3% on minimum deposits of £1,000.

Rachel Thrussell, head of savings at Moneyfacts, said investing offshore has become easily accessible to the mainstream public because many of the mainland UK banks now have offshore subsidiaries.

“The European Union Savings Directive, which came into effect in July 2005, means that details of any income received from offshore accounts is passed on to HMRC. However, it has always been possible to defer the payment of interest, which may be of benefit to some.

“Savers also need to be aware that in the unlikely event something goes wrong with the bank that they are investing in, they will be covered by the relevant compensation scheme.

“The amount of cover varies depending on where the company is based, but none are as comprehensive as the Financial Services Compensation Scheme that covers the UK. In fact, there is no depositor protection scheme in either Jersey or Guernsey.”

Nearly half of British motorists admit to having a poor or ‘non-existent’ understanding of modern car engines, with just one in 20 believing they have an excellent understanding.

Only 4% of motorists said they would feel confident enough to make major repairs if they were to break down with a further 18% only able to make basic repairs to their cars.

Not wanting to admit that they are beaten by modern cars and living up to common stereotypes, 71% of men say their knowledge of cars is average or above, despite them admitting they aren’t capable of fixing their car in the event of a breakdown. Men are also more reticent to admit a total lack of knowledge with only 10% acknowledging they know nothing about modern cars compared to 30% of women.

Emma Holyer, spokesperson for Britannia Rescue, said: “There is little doubt that innovation has made driving a far more pleasurable experience, but it has made part-time weekend mechanics a thing of the past. With many cars relying on complex electronics or technology, many problems now require specialist equipment, as well as specialist knowledge, to get the problem fixed.

“This means it is even more vital that motorists take out breakdown cover, so if something does go wrong with their car they are able to get back on the road as easily and quickly as possible.”

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The price comparison site said the rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day. As disposable income is being squeezed through increases in the cost of food, fuel, utilities and general living necessities, these loans are being increasingly used to help those on a tight budget.

Tim Moss, head of loans at Moneysupermarket, said: “Payday loans can be useful as a short-term credit vehicle. They are a bit like taxis – convenient for short journeys, but if you are going a long way, there are much cheaper ways to travel.

“They should only be taken out when it’s absolutely necessary and you are sure you can pay it back quickly. Anyone looking for longer term credit or unable to pay off the debt immediately, should steer clear of them. It would be wiser to borrow the cash from family or friends or arrange an authorised overdraft with your bank.

“Payday loans have a maximum term of 30 days, with a typical interest rate being 25% per month. Borrowing £80 for a month and repaying £100 is a better deal than going into your unauthorised overdraft.

“Of course, the best solution is to sit down and analyse everything you are spending your money on: Are there any potential savings you can make and is all of your spending essential? Then get in the habit of making regular contributions to a high-interest current account, so there is always money available should you need it.”

The friendly society has reported that 54% of retirees are currently finding it difficult to make ends meet, with 49% of those forced to make cutbacks and 17% simply going without. In addition, 10% of retirees have gone into debt by putting bills on credit, despite 13% previously battling to pay off credit card debt. Other options for financially squeezed retirees included turning to children or other relatives for help (4%) or raiding savings (36%).

The top expenses putting a strain on retirees include heating bills (33%), dentistry/medical treatment (21%), food costs (16%) and clothes (13%).

Karl Elliott, spokesperson for Engage Mutual Assurance said: “With the increased costs of food, fuel and mortgages taking effect, our research shows that those in retirement are becoming increasingly worried about being able to afford their everyday spending. We would always encourage those with money worries to seek financial advice in the first instance. We know that saving little and often today often helps families to prepare for those unexpected financial eventualities.

“By making the most of tax efficient savings opportunities such as ISAs and Child Trust Funds it is possible for families to build up a nest egg, should elderly parents become increasingly dependent on them or for when their children need some financial support to get them started in adult life.”

Research from the website found that 726,000 people missed a gas or electricity bill in the last six months and as a result, could be trapped into staying on an expensive tariff if they don’t settle their bills.

Energy providers currently state that any money a customer has not paid to them becomes a debt after 31 days. Suppliers are then allowed to stop their customers changing to another company until such debt is repaid.

British Gas owner Centrica recently warned that it will have to increase prices to maintain profits, sparking speculation that an average household could face yearly fuel bills of more than £1,300.

Sean Gardner, founder of MoneyExpert, said: “With wholesale energy prices increasing, it’s inevitable that gas and electricity prices will rise again, so we anticipate large numbers of people to look to switch to the most competitive deals once that process begins. Generally speaking, if you have defaulted on a recent energy bill and still owe your supplier money, you will be tied into that contract until you pay up.”

The biggest influencing factors to the change in inflation came from price hikes made to items related to housing and household services. There were further large upward contributions from food and non-alcoholic beverages in particular meat, fruit, some breads and cereals and fish.

According to Alliance Trust, food price inflation has increased by more than 7% over the last year, utility prices have increased by over 8% and petrol prices have risen by 19% in the same period. Simon Ward, chief economist at New Star, said: “Today’s inflation figures are shocking but should not have come as a complete surprise given recent warning signals.”

Inflation rates, however, tend to differ according to different age groups. Alliance Trust found that the inflation rate facing the over 75 year-olds is actually 4.1%. This is due to a larger proportion of older people’s income going towards the cost of food and utilities.

Shona Dobbie, head of the Alliance Trust Research Centre, said: “We still face the problem that it is the prices of basic goods and services which are displaying the highest inflationary pressure. When everyday items are going up in price, the impact on our wallets is highly visible to us all. The official headline rate of inflation rose considerably this month, but in the case of food and energy the situation is even worse, and this leaves us with less money to spend on the items where prices continue to fall. “

Eight of the 10 EU countries with largest growth in stock prices since 2003 were in eastern Europe, according to Halifax, with Bulgarian share prices having risen by 352% - the fastest rate across the EU and 6 times greater than the growth of UK stock prices at 55%.

Halifax’s research also found that Estonia recorded the largest fall in stock prices since April 2007, while UK stock prices fell by 6% over the last year.

Martin Ellis, chief economist at Halifax financial services, said: “Despite the recent financial market difficulties, the long-term performance of equities across the EU has been strong. Over the past five years shares prices have risen by an average of 17% per annum.

“The top performing stock markets over the past five years are primarily the newest members to the European Union. These countries have clearly benefited from greater capital flows, especially foreign direct investment and the further integration of their financial markets within the EU. This has boosted share prices substantially.”

Research from the insurer found that one-in-two owners without pet cover, accounting for more than 5.5 million, believe that they do not need insurance for their pet. According to Sainsbury’s Finance, around 15,000 claims are made each month for veterinary treatment for dogs and cats.

More than 4.5 million dog or cat owners said they didn’t have pet insurance because they thought it was unnecessary. A further 897,000 people said they didn’t need cover because they thought their cat or dog was healthy. Around 1.13 million people considered it to be too expensive.

Steve Johnson, head of pet insurance at Sainsbury’s Finance, said: “Regarding pet insurance as unnecessary and discounting it just because the pet is currently healthy are probably the two most alarming responses to report.

“Dogs and cats are just as likely to get ill and require treatment as we are but there’s no NHS for them. Pet insurance really is essential if you don’t want to get caught out by costly vet bills - the average claim for vet’s fees is around £300 with one in every 26 trips “

Research from the website found that an estimated 1.6 million credit card users have had their credit limit reduced while 1.3 million have either been hit with an annual fee or had their account closed down altogether.

One-in-four people affected were told this was because of poor credit ratings, with 16% being told it was because their account wasn’t being used regularly. More than three quarters of credit card users were not given a reason at all. However, 51% of those affected were using their card regularly and making at least minimum repayments, uSwitch said.

Simeon Linstead, head of personal finance at uSwitch, said: “We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand. However, resorting to account closures, reducing credit limits and implementing annual or monthly fees without providing over 1 in 4 people with a reason for doing so is not good for consumer confidence or financial planning.

“Credit card companies who are taking action to close down or make changes to customers’ accounts must be completely open about how and why they have selected those customers.”