‘Reward’ account... but who benefits most?

PROFIT-HUNGRY banks now prefer customers to pay for their banking and are persuading them to open packaged accounts – current accounts that levy a monthly fee in return for ‘free benefits’ such as cashback or travel insurance.

NatWest’s offering is the Reward account, which costs at least £2 a month. For that, customers get ‘rewards’, equivalent to 2 per cent of spending on up to seven ‘selected’ household bills such as phone, energy and council tax. The bills must be paid by direct debit.

An extra 1 per cent can be earned by using the debit card at some retailers, such as Ernest Jones, and travel firms like P& O Ferries. A customer spending £345 a month on seven eligible household bills should earn annual cashback of £83. Subtract the account fees from this and a basic Reward account holder (paying £2 a month) will be ‘in the money’. Significantly though, a person’s big monthly bills – the mortgage, credit card and insurance – are excluded.

There is more to the account than cashback. Rewards can be donated to charity or converted into gift cards – £10 can be exchanged for a £15 Pizza Express voucher, for instance. Those who want to go higher up the reward ladder can get discounts on cinema tickets, free insurance and roadside assistance. To benefit, customers must fork out more each month (£10 for a silver account, £20 for platinum or £28 for black). But these insurance extras may not offer the same level of cover as standalone plans.

VERDICT: Like most packaged accounts NatWest Reward is set up to benefit the bank rather than the customer – after all it is in business to make profit. In most cases an account paying credit interest is a better option.