Banking with current accounts: to pay or not to pay?

The UK has traditionally enjoyed a long history of free banking and most people would balk at the idea of actually having to pay to use their current account. Yet in many other countries of the world, paying for a current account is very much the norm.

Customers of banks in Australia, Canada, South Africa and New Zealand all have to pay a monthly fee even for the most basic current account, which normally covers a limited number of cash withdrawals and transactions. Banking in these countries tends to be more expensive as banks can charge customers for receiving statements and even depositing money in some cases.

So why would anyone want to pay for a current account when you could instead bank for free? Well, though free current account banking provides an adequate service for many people in the UK, there are a number of benefits and potential savings that can be gained by paying a small amount each month for a current account.

Depending on your personal situation, paying for a current account could actually save you a reasonably sum of money. Paid for current accounts, (also known as premium current accounts) tend to offer a range of benefits such as an interest free overdraft, credit card protection, free travel insurance, car break down cover, domestic emergency cover insurance and accidental death insurance.

Whilst you only pay a small fee for a premium current account, (anywhere from around £6 to £15 per month) - the potential savings that can be made from the use of the added benefits of a premium current account could easily outweigh the cost.

Of course, not all premium accounts will save everyone money. For example, teenagers or students are unlikely to have much need for home insurance or domestic emergency cover, yet they may well benefit from the free car insurance and mobile phone cover that is offered with some premium accounts. For homeowners, car owners and frequent travellers, a premium account could well be worth the monthly fee.

When looking for a current account, be sure to shop around in several different banks and analyse the package that each is offering. Most banks have a selection of premium accounts, offering different tiers of benefits to customers. Some of these benefits may be of little or no use to you, so do your calculations to ensure that paying the monthly fee will actually be worth it in terms of the savings you make.