Earn £60 a year from an empty current account!

by John Fitzsimons on 13 January 2011  |  16 comments
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Even if you finish the month with no cash in your bank account, you can still get a great return.

We all want to get a decent return on our cash, whether that’s the money we set aside in savings or whether it’s the cash we keep in our current accounts. And it’s become the case that there are a handful of current accounts which actually offer a better return on your money than dedicated savings accounts, a near-farcical situation.

However, with one brilliant current account, you can get a great return, even if the account is empty for most of the time.

The Halifax Reward current account

My wife and I took out the Halifax Reward current account jointly when we bought our house, to cover the main bills, and it’s been a fantastic – and very clever – account.

Despite the fact that the account states that it pays interest of 0%, it actually offers a great return, whether you have money in there or not!

Here’s how it works. Each month that you pay in £1,000, you’ll benefit from a payment of £5 from Halifax. And you’ll get that payment, irrespective of your balance at the end of the month. So long as you pay in £1,000, it doesn’t matter if your closing balance is £1,000 or £0, you’ll still get the money from Halifax!

In fact, you’ll get the money even if you end up overdrawn, though that’s not a smart move with this account, as you’ll be charged £1 for every day you’re overdrawn.

£60 a year for nothing!

So over a year, that works out as £60, even if your current account is empty most of the time, an extraordinary result.

What’s more, by having this current account, you’ll benefit from more attractive deals on other financial products from Halifax. For example, if you go for the Halifax All in One credit card, ordinarily you would enjoy 10 months of 0% interest on both balance transfers and purchases (hence the All in One name). However, if you have the Reward current account, you’ll get an extra two months free from interest on purchases, making it one of the best cards around!

Similarly, if you go for Halifax’s marvellous Direct Reward ISA, the tax-free rate of return you’ll enjoy on your cash will jump from 2.8% to 3%. You’ll also enjoy an extra 0.2% on your savings in the Web Saver Extra account (taking it to 2.70% currently).

And when it comes to mortgages, you’ll enjoy a rate 0.2% lower than those available to non-current account holders.

That’s a hell of a return, just for paying £1,000 a month into your current account!

Going for an upgrade

In fact, there’s even an upgraded version of the Reward account to consider, the Halifax Ultimate Reward Account.

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As with the basic Reward account, each month in which you pay in £1,000, you’ll receive £5 from Halifax, irrespective of your closing balance.

However, with the Ultimate Reward account you’ll also enjoy a fee-free £300 overdraft, worldwide multi-trip travel insurance, AA breakdown cover and accident management, mobile phone insurance, home emergency cover, travel accident cover, identity theft assistance and card protection for all of your debit and credit cards.

As with any packaged current account, there will be a fee to consider, in this case £12.50 a month. So if you reckon you’d benefit from all of those extras, it may work out as the best account for you. However, personally I’m not a big fan of packaged current accounts, and would rather go for the basic Reward account and then sort out whatever insurance I needed separately.

How it compares

The top rate of interest currently available from any current account is 5%, which you’ll enjoy if you go for the Santander Preferred In-Credit Rate account. However, that rate will only be paid up to a balance of £2,500 (while you’ll also have to deal with the customer service levels, which are generally slated by lovemoney.com readers).

After a year you should be looking at about £100 in interest (for basic tax-rate payers, anyway) if you maintain the balance at £2,500 for the full year. That’s great if you’re in a position to have that much cash in your current account, but with the economy as tough as it is at the moment, many of us are not in such a comfortable position.

If instead you maintain a balance of only around £1,000 over the year, you’ll be looking at an after tax return of about £40, falling short of the return from the Halifax Reward Account.

The other current account paying a decent rate of interest is the Lloyds TSB Classic with Vantage which pays 4%. However, that’s only payable on sums of between £5,000 and £7,000. So for those of us who don't have a huge stash of cash to keep in our current accounts, it doesn’t rival the Halifax Reward account.

In fact, unless you are the sort of person who ends the month with a bank balance in credit to the tune of thousands of pounds, I don’t think you can get a better return anywhere else than from the Halifax Reward account.

More: The best savings accounts for 2011 | The overdraft scandal

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