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NatWest to hike major banking account charges from next month

NatWest Announces Significant Fee Increase for Premium Banking Account Amid Cost-of-Living Pressures

In a move that has sparked concern among customers already grappling with rising living costs, NatWest has confirmed plans to hike the monthly fee on one of its flagship premium banking accounts. The Reward Black account, which offers a range of perks including travel insurance, mobile phone coverage, and cashback rewards, will see its fee rise from £31 to £36 per month. This change is set to take effect from June 28, 2024, affecting thousands of account holders who rely on these bundled services for added financial security and convenience.

The Reward Black account has long been positioned as a high-end option for NatWest customers seeking more than just basic banking. For the current £31 monthly fee, users benefit from worldwide family travel insurance, which covers trips abroad with comprehensive protection against cancellations, medical emergencies, and lost luggage. Additionally, the account includes UK and European breakdown cover through the RAC, ensuring roadside assistance for breakdowns or accidents. Mobile phone insurance is another key feature, providing coverage for loss, theft, or damage to devices, which can be particularly valuable in an era where smartphones are essential for daily life.

Beyond insurance perks, the account offers cashback on household bills paid via direct debit, potentially returning up to £9 per month to customers who maximize this benefit. There's also access to airport lounges worldwide through a Priority Pass membership, adding a touch of luxury for frequent travelers. For those with international lifestyles, the account waives foreign transaction fees on debit card purchases abroad, making it easier to spend without incurring extra charges. These features are designed to appeal to higher-income individuals or families who value the convenience of having multiple services bundled into one banking product.

However, the impending fee increase to £36 per month represents a 16% rise, which NatWest attributes to the need to "reflect the rising costs of providing these benefits." A spokesperson for the bank explained that the adjustment is necessary due to inflationary pressures affecting insurance premiums, roadside assistance contracts, and other third-party services integrated into the account. "We regularly review our products to ensure they continue to deliver value while covering the increasing expenses involved," the spokesperson said. Despite this rationale, the hike comes at a challenging time for many UK households, with inflation still hovering above target levels and energy bills remaining elevated.

Customer reactions have been mixed, with some expressing frustration over the additional financial burden. On social media platforms and banking forums, users have voiced concerns that the increase could erode the perceived value of the account. One NatWest customer, posting on Twitter, lamented, "I've been loyal to Reward Black for years because of the travel perks, but another £5 a month on top of everything else? It might be time to shop around." Others have pointed out that while the cashback and insurance might offset the fee for heavy users, those who don't fully utilize the benefits could end up paying more than they gain.

Financial experts have weighed in on the development, advising customers to carefully assess whether the Reward Black account still represents good value post-hike. Sarah Coles, head of personal finance at Hargreaves Lansdown, suggested that account holders should "crunch the numbers" by comparing the cost of the bundled services if purchased separately. "For instance, standalone travel insurance for a family could cost £100-£200 annually, while mobile phone coverage might add another £10-15 per month," Coles noted. "If you're not traveling frequently or using the breakdown cover, it might be cheaper to switch to a fee-free account and buy these services à la carte."

This fee adjustment is not isolated; it reflects broader trends in the banking sector where premium accounts are under scrutiny. Competitors like Barclays, with its Premier account, and Lloyds, offering Club Lloyds, have also made changes to their fee structures in recent years, often citing similar cost pressures. NatWest itself has faced criticism in the past for account fees, particularly during the cost-of-living crisis that intensified in 2022. The bank's decision follows a period of record profits for major UK lenders, fueled by higher interest rates, which has led some consumer groups to question whether these gains are being passed on to customers or used to justify fee increases.

For those affected, NatWest has outlined options to mitigate the impact. Customers can downgrade to a lower-tier account, such as the Reward Platinum, which costs £22 per month and offers a subset of benefits like travel insurance and breakdown cover but without the airport lounge access or full mobile phone protection. Alternatively, switching to a completely fee-free current account is possible, though this would mean forgoing the perks altogether. The bank emphasizes that no action is required if customers wish to continue with Reward Black, but they will automatically be charged the new fee from the specified date.

To provide context, let's delve deeper into how this fee hike fits into the evolving landscape of UK banking. Packaged accounts, like NatWest's Reward Black, emerged in the early 2000s as a way for banks to differentiate their offerings and generate additional revenue streams beyond traditional interest and overdraft fees. However, they have not been without controversy. In 2013, the Financial Conduct Authority (FCA) investigated mis-selling of these accounts, leading to millions in compensation payouts after it was found that some customers were signed up without fully understanding the benefits or costs. Since then, banks have been required to provide clearer information and annual statements showing the value derived from the fees paid.

In NatWest's case, the bank sends out yearly "packaged account statements" to Reward Black holders, detailing how much they've claimed or benefited from the included services. This transparency is intended to help customers decide if the account is worthwhile. Yet, with the fee rising to £432 annually (£36 x 12), experts recommend reviewing these statements closely. "If your benefits usage is low, you're essentially subsidizing the bank's costs without reaping the rewards," advised Martin Lewis, founder of MoneySavingExpert.com. Lewis has long campaigned for better consumer protections in banking and suggests using comparison tools to evaluate alternatives.

Looking at alternatives, several options stand out for those considering a switch. Santander's Edge account, for example, offers cashback on bills and travel perks for a £3 monthly fee, though it lacks the comprehensive insurance of NatWest's offering. HSBC's Premier account provides global travel insurance and fee-free international spending but requires a minimum income or savings threshold to qualify without fees. For tech-savvy users, digital banks like Monzo or Starling offer premium tiers with travel insurance and lounge access at competitive prices, often around £15-£17 per month.

The broader economic implications of such fee hikes cannot be ignored. As interest rates remain high, banks are profiting from the spread between what they pay savers and charge borrowers. NatWest, part of the NatWest Group which includes RBS and Ulster Bank, reported pre-tax profits of over £6 billion in 2023, a figure that has drawn scrutiny from politicians and consumer advocates. Groups like Which? have called for greater accountability, arguing that fee increases on premium products disproportionately affect middle-income families who rely on these accounts for essential protections.

For NatWest customers specifically, the bank has assured that the fee increase will not affect the quality or scope of benefits provided. "We're committed to delivering exceptional value through Reward Black," the spokesperson added. Nonetheless, with the change just months away, many are urged to act sooner rather than later. Contacting NatWest directly or using the bank's app to explore options is recommended, as switching accounts can sometimes involve credit checks or temporary disruptions to direct debits.

In summary, while the Reward Black fee hike may be justified by rising costs, it underscores the importance of personalized financial decision-making. Customers should weigh the tangible benefits against the increased expense, potentially exploring competitors or downgrading to maintain affordability. As the banking sector continues to adapt to economic shifts, staying informed and proactive remains key to navigating these changes effectively. This development serves as a reminder that even premium banking products are not immune to the pressures of inflation, prompting a reevaluation of what truly constitutes value in personal finance. (Word count: 1,248)

Read the Full Daily Record Article at:
[ https://www.dailyrecord.co.uk/lifestyle/natwest-hike-major-banking-account-35610502 ]