Halifax has told holders of its Reward current account they will have to opt into potentially paying a £3 monthly fee for it, under changes coming in at the start of June.
Customers will have to pay in £1,500 a month or be billed £3, while the bank is also revamping the account’s cashback offer.
Currently, those who pay in £750 a month, pay out two direct debits and stay in credit receive a £2 monthly reward.
But from 1 June, customers can earn £5 a month in cashback provided they stay in credit and either maintain a balance of £5,000, or spend £500 or more each month using their debit card.
Giving you extra? Halifax’s changes to its Reward account, which come into effect in June, mean the account now comes with more hurdles, but it pays out a bigger cashback bonus
Alternatively, customers can opt for one of three reward benefits.
These include a choice of three digital magazines from publisher Hearst, including Cosmopolitan, Good Housekeeping and Men’s Health; a free Vue cinema ticket every month; or the option of streaming two films a month from Japanese streaming service Rakuten TV.
Some of the films currently available to rent from the service include Terminator: Dark Fate and the Oscar-winning Joker, which can be rented for £4.99 and £5.49, respectively.
It is important to note customers must make a choice for a 12 month period, and including whether to opt for the saving or spending requirement and which of the four reward options to go for.
Current account holders will not be automatically transferred to the new account on 1 June, and instead must let the bank know by phone by 15 May.
If they don’t opt in by then, they will be transferred to Halifax’s fee-free current account in June.
How does the deal stack up?
The changes from Halifax do add a lot more hurdles for customers in search of rewards, and those unable to pay in £1,500 a month and meet either the £5,000 balance or £500 spending requirements will lose out.
But for those who can stick by the rules the reward can be more generous.
The £1,500 a month requirement effectively brings Halifax’s Reward Account in line with its stablemate Lloyds Bank’s Club Lloyds account.
This requires customers to pay in £1,500 a month or else they are charged £3 a month.
But rather than a monthly reward, Club Lloyds pays 1 per cent interest on balances of up to £4,000, and 2 per cent on balances from £4,000 to £5,000 – but only that £1,000 element.
This is provided customers pay out two direct debits.
This works out at £60 interest if customers kept in the full £5,000 for a year.
Opting for the Halifax cashback offer and sticking to the rules would net a customer the same sum.
Meanwhile Santander’s £5-a-month 123 Current Account currently pays 1.5 per cent interest on balances of up to £20,000 and cashback of up to 3 per cent on bills, but from May the rate will be cut by a third to 1 per cent.
Currently a customer with £5,000 in the account would earn £75 a year in interest, while from May they would earn £50, following the cut.
TSB recently announced that in May it would slash the interest rate on its Classic Plus account from 3 per cent to 1.5 per cent, the second rate cut to the account in 10 months. The bank pays the interest rate on balances of up to £1,500.
But Andrew Hagger, founder of personal finance site Moneycomms, said: ‘I’m not a fan of this latest move by Halifax – at present you can earn a £2 reward as long as you stay in credit, have a couple of direct debits and pay in £750 per month minimum.
‘The new deal introduces a £3 fee and a possible £5 reward, so still just £2 a month net, but the monthly credit criteria has doubled, plus you must spend a minimum £500 per month on your debit card, or keep a £5,000 credit balance.
‘To put it into perspective if you kept £5,000 in an instant access account paying 0.75 per cent you’d earn £3.12 per month.
‘It’s interesting that this move has come hot on the heels of the new Halifax overdraft tariff, which brings them in less revenue in all scenarios.
‘I’m sure they are hoping people sign up and don’t always meet the criteria for the £5 reward, which would be a nice earner and a way of recouping lost overdraft revenue.’
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Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.
NatWest’s Reward Silver Account offers a £175 switching incentive to new and existing customers as well as insurance cover for European travel. Customers can also earn rewards which can be redeemed as cash or gift cards.
Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.
HSBC’s Advance Account offers £175 cash if you switch to it. The account comes with a £1,000 starting overdraft and 2.75% regular saver account. There is no monthly fee, however you must deposit £1,750 per month into the account.
Nationwide’s FlexDirect account comes with 5% interest on up to £2,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.
But could this deal soon be the best savings rate around?
After the Bank of England cut its base rate to 0.25 per cent on Wednesday, it is likely savings rates, already falling, will tumble even further.
Indeed easy-access accounts from Principality Building Society, Leeds Building Society, Yorkshire Building Society and the Co-op Bank have already been slashed.
But while it comes with several hurdles to clear in order to get the reward, £60 a year in cashback on a balance of £5,000 works out at about 1.2 per cent a year in interest, which represents a decent return at the moment when the best easy-access rate pays 1.31 per cent.
Of course, the same interest sum is offered by Lloyds Bank over the course of a year, but it is possible that with savings rates set to fall again that those after a return on their savings could be forced to opt for unusual accounts like this one, or even NS&I’s Premium Bonds, which have a prize rate of around 1.4 per cent until May and can win savers up to £1million.
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