Fees on packaged current accounts have increased by a third in the past five years. Read about what else is happening in the market here.

By Lana Clements

Banks are using "packaged" current accounts to reap extra money from customers, increasing the average monthly fee by a third in five years, according to financial research company Defaqto.

Sales of packaged current accounts have risen in recent years and providers have been quick to catch on to the money spinner. The number of such accounts on the market has increased by 109% over five years.

Packaged current accounts can cost from between £6 and £40 per month, but incorporate a range of added benefits - typically including extra insurance, such as mobile phone or travel insurance, or breakdown cover.

Critics have said accounts are bad value for money. For instance, last year, consumer organisation Which? found that a third of people don't use any of the benefits offered on their account, wasting between £240 and £320 million each year.

As a result, the Financial Services Authority (FSA) launched an investigation into the market and set out a number of proposals on how the products are sold last October. Defaqto has today said a solution to the problem would be allowing customers to pick and choose from the benefits on offer.

David Black, Defaqto's insight analyst for banking, explains: "For providers, the FSA's proposals represent both a challenge and an opportunity. One possible route is that the industry will move to a 'menu-pick' option for packaged current accounts.

"While this would have cost implications, it would enable providers to visibly demonstrate their flexibility in developing products that meet the actual needs of each consumer."