A new fee and new rewards make this account a very different proposition. Should you ditch it?
When the bank switching service first came into play back in 2013 I moved over from my ancient Barclays account to the Halifax Reward account.
Not only did I get a nice £100 bonus I also got £5 a month, every single month. That dropped to £3 a month, then £2 a month. I’ve kept it just because it was earning a little bit of cash every year – but it’s not one I’ve recommended for a while now.
Well, from the 1st June 2020 it’s going to change again. Halifax has started contacting customers with details of the new Reward accounts (thanks to fellow money blogger Or Goren from Cordbusters.co.uk for giving me a heads up).
What’s changing
A new monthly fee
The Reward account will begin to start charging a £3 monthly fee, meaning it’ll cost you £36 a year. This isn’t unusual – many current accounts with benefits have a similar charge, including Barclays Blue Rewards, Natwest Reward and Santander 123.
However you won’t pay the fee if you pay in £1,500 every month. Most people should be ok with this if they pay their salary in – you need to earn just under £22,000 a year to take home this amount after tax and National Insurance.
Different rewards
The £2 monthly reward will be replaced by something called Reward Extras. To be eligible for this you’ll need to either spend £500 a month on your debit card or keep £5,000 in the account every day of the month.
You need to pay in the £1,500 a month every month to get your reward (which you should be doing to avoid the fee), and you need to stay in credit.
If you do either of these you then get to pick a reward. These are:
- Three digital magazines a month from a selection of Hearst magazine titles (eg Good Housekeeping, Red)
- Two HD digital movie rentals from Rakuten
- One Vue cinema ticket a month
- £5 a month
The offer you choose is fixed for at least 12 months, so you can’t mix and match throughout the year. You can choose a new reward at the start of each year.
Are the new rewards any good?
I’ll look at each benefit in turn:
£5 monthly reward
Well on the surface the offer seems good. £5 a month is better than the current £2 a month, as long as you are avoiding that monthly fee.
However you need to factor in the new requirements that mean you either need to spend or save a lot of money each month with Halifax.
So if you spend £500 a month you’ll earn £60 a year (if you take the cash option). Compare this spend to using a cashback card and it’s the equivalent of 1% back – so no real difference to using the top American Express cashback cards.
The alternative option of £5,000 a month in your account for the same reward, isn’t any better. Do this for a year and it’s the same return as putting that money in a 1.2% savings account.
With news of the interest rate cut that could end up being quite healthy in comparison to others, but right now you can still beat that. And you’d need to have £5,000 in savings, which we know many people don’t.
So ultimately you can get the same or better than this elsewhere.
It’s also worth noting that if you are a higher rate taxpayer you’ll be liable to pay extra tax on this bonus.
Free cinema ticket
Vue cinema tickets can vary between a fiver through to well over a tenner – it all depends on where you live.
Now if you have an expensive Vue cinema near you and go once a month then the return starts to look a lot better. Say your tickets are £10 that’s an annual reward worth £120. If tickets are £12 it’s worth £144. It’s likely the highest paying reward after you factor in the £60 you’d not be earning in cashback or savings if your money was elsewhere.
The code you’ll get each month can also be used for more expensive 3D screenings too, increasing the value (though I’m not a fan). It’s possible you might be able to combine it with other offers and savings too.
Even so it’s possible to save on cinema tickets in lots of different ways, such as 2-for-1 tickets with Meerkat Movies, and deals like this could work out as a better option. Here’s my guide to the best ways to save at the cinema.
Digital movie rentals
The vouchers will be worth £4.50 to use on Rakuten, which is enough for most HD films (occasionally some are £4.99). So you’ll be getting £9 back from your account. That means it’s got a true value to you of an additional £48 a year (that’s the £108 a year minus the £60 your money could be earning elsewhere).
I think that makes this a decent offer if you regularly watch two new release HD movies a month.
If you don’t, or already have something like Sky Cinema, then it’s not worth it.
It’s worth remembering too that you can also often get free or cheap rentals from time to time in other ways (which I’ll share here). For example, Amazon often runs £1.99 rentals for Prime customers, while Chili has 99p selections.
The vouchers are valid for 35 days, and once you choose your film you’ve 48 hours to watch your film.
Free magazines
It’s not clear which titles you can pick from, but seeing as it’s Hearst you get the magazine from it’s likely to be one of these options.
Your picks will be digital-only, so you’ll need a tablet or computer to read them. It looks like the three magazines you choose at the start of the year will be the same ones you’ll get all year.
Personally I’d check first what magazines you can get for free from your local library.
Should you get it / stick with it?
I think that if you’d only go for the cash reward there are better choices out there. In fact any account that’ll give you a switching bonus will be worth taking advantage of. I’ve got a regularly updated list of the different offers here.
Andy I don’t think the magazine offer is that good either thanks to the alternatives
However, the cinema and movie rental options could be worth looking at if you are already spending this money on those services.
Personally, I’m not sure it’s worth using the Halifax debit card over my cashback credit cards to get any of these deals – which could mean I completely ditch my Halifax account.
What do you need to do?
If you want to make the change you’ll need to let Halifax know by 15th May 2020. You need to all them on 0345 129 9733.
If you don’t do this, you’ll automatically be moved to a standard current account on 1st June 2020. If this happens your account number and sort code will stay the same, you’ll just be on the basic free account.
Any one who decides they don’t want to keep it should take advantage of bank switching offers elsewhere to get some free cash and potentially other rewards on top.
Just went through the Halifax procedure chose the £5 a month I can meet the £1,500 pay in a month simply by rotating money between accounts £1,500 into Lloyds Club to get their interest and then to Halifax now keep a few quid in Halifax to stay in credit. The good part about this is the £500 on the debit card can be paid into council tax online American Express isn’t accepted, it can also be used in other places Amex isn’t accepted, failing that credit card balances can be paid online so the £500 a month should easily be achievable. One other thing is I don’t think the reward is taxable now similar to Topcashback and things like that as it isn’t termed interest but a marketing reward incentive/ discount etc, much the same as we don’t pay tax on the difference between a reduced item and the normal full price in a shop. I think when it started off in 2013 it was in place of interest but it has now morphed into a different account all together. Thanks Mark
Cheers Mark, interesting thought about using it to pay credit card balances. In the small print I found details where the £5 reward is actually a £6.25 reward that’s taxed at 20% hence the warning that 40% rate taxpayers should probably declare the reward.
2 questions
1- does your direct debit payments count to your £500 monthly target?
2- will i get my £2 reward if i go to fee free account on june 1st for the month before?
Hey Toby, it’s debit card payments only, and cash withdrawals don’t count. And sadly the free account has no Reward at all.
Hi Andy,
Yes thanks I’ve seen that somewhere in the past. It does seem that since (2016) the changes to interest where banks don’t deduct tax on interest at source (the £1,000 allowance at 20% taxpayer and £500 allowance at 40% taxpayer) there are further issues.
Apparently rewards do not seem to be covered by the bank interest allowances being classed as annual payments (fully taxable) not bank interest it seems banks pay the 20% tax (to continue?) on a gross value and leave you with the residue as the reward, hence higher rate taxpayers could be liable for more. An exception to this is where a reward is paid on accounts that charge a fee like Barclays Blue, the payment is called a miscellaneous one which is not treated the same as an annual payment so is fully taxable so of considerably less benefit.
There is something on MSE from around 2016 on it see:
https://www.moneysavingexpert.com/news/2016/07/halifax-barclays-or-co-op-bank-customer-you-may-need-to-pay-tax-on-your-rewards/
I’ve not been able to establish (the girl didn’t seem to know when I called to sort the new deal out) whether the two direct debits are still required as there is no mention of that in the new reward terms letter so I suspect not(?)
So it is more complicated that I thought it would be, cash rewards potentially not being as good as they initially seem compared to interest bearing accounts as the latter fall into ones personal interest allowances whilst the rewards do not. Higher rate tax payers carrying additional liabilities even if they have only used a tenners worth of their annual £500 interest allowance in a tax year.
I guess as the amounts are likely to be relatively small it seems HMRC doesn’t actually require separate tax returns to be completed for this if a higher rate tax payer as presumably the admin for collection would outstrip the recovery, but if one has to complete a self assessment it should be included, I suppose as HMRC has to do the admin anyway on the return so it isn’t extra work for them.
It would be quite funny if every PAYE higher rate tax payer with one job and an occupational pension getting annual interest under their £500 allowance sent in a self assessment for the £60 a year (at £5 a month reward they should pay another 20% tax on) result being flooding HMRC with loads of extra administration for the princely sum of an extra £12 a year tax recovery per person:)
Cheers
Mark