Halifax has made a lot of noise about this current account, which pays you £5 every month if you pay in at least £1,000.
Overdraft interest has also been replaced by straightforward fixed charges: £1 a day for authorised overdrafts up to £2,500 and £2 a day for overdrafts above this. Unauthorised overdrafts are charged at £5 a day.
The account also offers a visa debit card and you can withdraw up to £300 a day from cash machines.
However, use the debit card to spend or withdraw cash overseas and you’ll face charges that are nothing short of daylight robbery. You’ll be charged 2.75% and £1.50 per transaction – spending the equivalent of £10 will cost you at least £11.77!
Overseas fees notwithstanding, Halifax does deserve a pat on the back for simplifying charges. But how does the Reward Current Account compare to those with more conventional interest and charging?
The £5 monthly payment is after basic rate tax has been deducted, so it’s worth £6.25 gross. If we assume an average £1,000 account balance the equivalent annual interest rate is 7.5% gross – very attractive versus the competition. On lower average balances the equivalent rate looks more appealing still, but the equivalent gross rate for a £5,000 average balance is just 1.5%, nothing to write home about.
Replacing overdraft interest with a fixed daily rate seems a neat idea, but it could leave you a lot worse off compared to a conventional current account if you stray into an authorised overdraft.
Assuming you receive the £5 monthly payments then the net the equivalent annual overdraft rate, in simple terms (because there’s no compounding with a flat daily fee), is shown below for various balances:
|Equivalent Annual Rate|
Given the majority of current accounts don’t charge fees for authorised overdrafts, just interest at around 10-20%, the Halifax Reward Current Account looks very poor value by comparison for both smaller overdraft balances and those just above £2,500.
The unauthorised overdraft charge of £5 a day looks steep, but is similar to that charged by most banks – a reminder to avoid unauthorised overdrafts wherever possible.
The overall appeal of this account really depends on your circumstances. If you’ll pay in at least £1,000 every month, have a low average balance, avoid overdrafts and rarely spend overseas then it’s a very good deal. For anyone else it’ll range between ok and downright awful, being worst value for those who consistently have a small authorised overdraft and/or spend money overseas.