Is it worth paying for a bank account?

The compensation bill that will hit the front-door mats of our banks for misselling payment protection insurance (PPI) is estimated to be around £10bn. So you might think they'd now be chastened and ready to concentrate on serving their customers. Pigs might also fly. Over the last few years our banks have focused on selling a new way to take your money packaged accounts'. Here's why you should be wary.

You may be one of theten million British customers who have already bought one of these products. The idea is that, instead of the standard, free' current account, you pay a fee for the privilege of giving a bank your money. Given that your bank can already make healthy profits by lending your money out at a higher interest rate, you might wonder what you are paying for. The banks offer all sorts of services on these accounts. Travel insurance, car insurance and investment advice are some of the perks on offer. In exchange, you'll pay up to £25 a month.

Should you? No. One problem is that, just like PPI, the accounts are being sold to people who may not benefit from them. "Many customers are unaware that they are not covered by the travel insurance sold as part of the accounts, due to age restrictions," says Tanya Powley in the Financial Times. The regulator, the FSA, is worried enough that, from 31 March next year, it will force banks and building societies to check that customers are eligible for the services that come with the packaged accounts.

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Moreover, existing customers will receive letters informing them if they are eligible for the services they have been paying for. This could spark "a scramble for compensation to rival the PPI mis-selling scandal", says Rosie Murray-West in The Daily Telegraph. No-win, no-fee lawyers have already scented blood and are busy looking for customers.

A better route than going through the chase for compensation is to avoid these accounts in the first place. That's not hard as often you can find good free alternatives with the same bank.

Take Lloyds TSB. Its paid-for Gold with Vantage account costs £12.95 a month. For that you'll receive worldwide travel cover, mobile phone insurance and AA roadside assistance. Fine if that's what you need. But many people would be better off with a Lloyd's free Classic with Vantage account. It offers the same interest rate 1.49% and commission-free travel money. Plus, the £155 you'll save can be spent on shopping around for the tailored insurance cover you need and leave you with spare change.