Banks' £480m accounts windfall

CUT-PRICE holidays and cheap overdrafts are being used by Britain's big banks to entice customers to pay monthly fees for their current accounts, a report claims today.

According to Market analysts Mintel, around six million consumers are paying between £6 and £12 a month - a total of around £480m a year - for packaged current accounts which give them access to a range of additional benefits and services. Mintel claims the number of such customers could rise to eight million by 2006.

However, it has a warning for any bank that might be planning to introduce fees on all its current accounts. Out of the 1,926 adults questioned by Mintel, 37% said their current account satisfied all their banking needs.

Nearly a quarter felt that any benefits should be provided as standard, while 13% agreed that paying a small fee for benefits was a worthwhile concept.

The report says higher interest rates for savers are the most popular benefits, attracting 30% of those surveyed. Accidental death cover was the second most popular benefit, with nearly one in four choosing it. The next best incentives were discounts on holidays, reduced home insurance premiums and cheaper overdrafts.

Mintel analyst Paul Davies said: 'Account providers would be well advised to offer the type of benefit that might appeal to younger consumers such as cheaper holidays, discounted DVDs and CDs and lower travel insurance. It seems as if many people are happy to pay a monthly fee for their current account as long as they feel they are receiving additional benefits. However, a note of caution should be added. With competition within the current account market rising steadily, it would be a brave provider to be the first to bring in general fee-charging for services that have previously been free.'