Best buys:
Find out YOUR right account type
To ensure you get the account that's cheapest or most rewarding for you, it’s vital to work out what kind of customer you are.
Consider your history and peruse your last few statements. This’ll tell you which type of account to plump for.
Do you get rejected when you apply?
Most current accounts require a credit check, where the bank assesses whether it wants you as a customer. You may be rejected for one of many reasons. Don't assume because one doesn't want you, none of the others will. Read the Basic Bank Accounts guide for your options.
Are you ALWAYS in credit?
If you never touch your overdraft, not even by a pound or two, you should grab the account that pays the most interest on your positive balance. Find the best: Top In-Credit Accounts
Do you go overdrawn?
If your balance creeps into the red or stays permanently overdrawn, you need an account that charges you as little for using your overdraft as possible. If you flick between positive and negative balances, don't assume the best account for one is OK for the other. Find the best: Cheapest Overdrafts
Are you a student or recent graduate?
If so, you can easily beat the terms of the best accounts mentioned in this guide. Find the best: Read the Best Student Accounts or Best Graduate Accounts guides.
Do you pay a fee for your bank account?
Now, think about whether you’ve ever used those facilities. Are they worth the price? For some they're not, but others save £100s/year. We've built a Packaged Account Finder to help you assess their worthiness to you. But here are a few quick tips:
Step 1. Calculate the real annual cost. For example, if you're paying £12 per month, that's actually £144 a year. Just because getting the packaged account gives you 'better rates', don't think that means you've got a top deal. The rates may be better than the pitiful deals you'd get otherwise, but they're easily beatable by the fees-free deals listed elsewhere in this guide.
Step 2. As the rates aren't good, you need to evaluate the benefits the account gives you. Do you ever use them and if you do, is the account fee cheaper than getting them separately? For example, for less than £40/year you can get annual travel insurance or breakdown cover.
Step 3. If the account doesn't save you money, ditch and preferably switch to a non-fee account with the best rates. See the questions above for how to decide. Though for some people who use the perks, these accounts can be a good deal - see Best Premier Current Accounts.
If you didn't know you had one, or found out you weren't eligible to claim, you may have been mis-sold a packaged account - see the step-by-step guide for full help.
DON'T bank where you've got debts
If you've got debts with the same provider you bank with, a nasty rule called 'setting off' means it can take cash without warning to pay down the debts.
This is unlikely, and usually affects people struggling to keep up debt repayments, but it's certainly worth being aware of. More info in the full Setting Off guide.
Switching bank is easy and profitable
Banks automatically transfer standing orders and direct debits for you, leaving you just to notify people who pay into your account; especially your employer. Even so, always keep the old account open for a good few months after the switch, just in case something’s been missed.
Switching CAN make you £100s. While banking is 'free', this only applies if you're in credit. Most banks pay a pitiful 0.1% interest on your money then loan it out as overdrafts at 20%. So, even if you like the service, if it's so good, are you willing to pay £100s in lost benefit?
Will I get a new account?
Two things matter...
-
The credit check. You must pass a credit score. If you've been rejected regularly, consider a Basic Bank Account.
-
Minimum monthly income. Most accounts need a certain amount paid in every month. It can come from any source - salary, pension, other earnings - though it effectively sets a minimum earnings threshold. A £1,000/month pay-in equals a £13,600 pre-tax salary.
This needn't stay in the account, nor must you be in credit. So with some work, you can cheat this rule. Withdraw some money each month and pay it back in. If you earn £900 a month, pay your salary in, withdraw £100 and re-deposit it.
It's also worth noting that sometimes you can get extra cashback by signing up via special websites. See Top Cashback Sites for a full explanation and how to find which sites pay most. If you use travel, breakdown and mobile cover, see if a packaged account could save you money.
Switched bank before?
In the UK, old, now-dormant accounts hold billions of pounds that lay unclaimed - including money from deceased relatives. It's straightforward to get it back, we've full details in the Reclaim Forgotten Cash guide.
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Best buys: Top if you’re always in credit
If you never enter your overdraft, focus on earning the most interest on your positive balance. Most accounts only pay interest on a limited amount, so sweep the rest of this cash into the Top Savings Accounts to maximise your interest.
There's a variety of different deals available at the moment - we've listed in order of what we think are the best offers, but click the links or scroll through to find the one for you. NB. Most accounts require a minimum level of monthly income to be paid in.
First Direct
£100 bonus & top customer serviceHalifax
£100 + £5/mth or 0% overdraft-
Santander
Cashback on bills + up to 3% interest -
Nationwide
5% interest plus 12 mth 0% overdraft -
Nationwide
Free annual travel insurance
Top for customer service plus £100 bonus First Direct. 6% linked savings plus small 0% o/draft
- Min monthly income
- £1,000
- Apply
- In-credit interest: NONE.
- Arranged overdraft cost: 0% up to £250, 15.9% above that.
- Unarranged overdraft fees: £25 paid item fee or bounced payment fee of £0, £10 or £25.
First Direct gives £100 when you switch to it, and has won every customer service poll we've done, with 91% rating it great.
You need to pay in a minimum of £1,000 per month to get the account for free (equivalent to a £13,600 pre-tax salary).
If your income's set to drop, see our full details (below) for this account to find out how to avoid the fee.
It pays no in-credit interest, but does have a big 6% savings offer for its 1st Account customers, if you can save something every month. Read the Regular Savers guide for full details. There's also a small, interest-free overdraft of £250 - and you get these whether you pay in the £1,000 or not.
| Customer services poll (In credit) | ||
|---|---|---|
| Great | 91% | |
| OK | 7% | |
| Poor | 2% | |
| Date: Feb 2013 | Voters: 953 | ||
Customer service feedback
In our February 2013 poll of the top banks, First Direct again came top for customer service, with a huge 91% of in-credit customers saying they received great service.
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You'll be charged £10/mth unless....
The easiest way is to pay in £1,000 a month. However, if you have savings, insurance, a mortgage or credit card with First Direct, the fee will be waived.
So if your salary reduces, and you can no longer pay in £1,000 per month, consider opening a First Direct savings account that requires a low minimum deposit, such as their Everyday e-Saver Account (min £1).
Or, if you've more than £40,000 in ISA savings, check out the best buy First Direct Cash ISA.
How to get the perks
You must transfer a salary of at least £1,000 a month and switch at least two direct debits and standing orders. If you do this within three months, the £100 will be added to your account within 28 days of the criteria being met.
It pays no in-credit interest, but in most feedback on customer service First Direct rates very highly. Due to this, it also offers customers £100 if you switch away within a year, if you've maintained the monthly £1,000 deposits.
£100 switch bonus + long-term £5/mth if in-credit*Halifax: Also 0% overdraft for SIX months (won't get £5)
- Min monthly income
- £750
- Apply*
- In-credit interest: £5/month (AFTER tax).
- First six months overdraft: 0% EAR.
- Arranged overdraft cost: Up to £2k: £1/day. £2k-£2,999: £2/day. Over £3k: £3/day; £10 buffer
- Unarranged overdraft fees: £5/day
The Halifax* Reward account gives a flat £5 each month you deposit £750 (reduced from £1,000 from 1 May) but you must remain in credit. On top you'll get £100 for switching until 7 July 2013, and it offers a 0% overdraft for six months, but after that, overdraft fees are huge.
To get the £100 bonus, simply use Halifax's switching service to transfer all your standing orders or direct debits from your existing current account (this must be two or more standing orders or direct debits).
| Customer services poll (In credit) | ||
|---|---|---|
| Great | 38% | |
| OK | 43% | |
| Poor | 19% | |
| Date: Feb 2013 | Voters: 818 | ||
Customer service feedback
In our February 2013 poll of the top banks, Halifax
showed a slight improvement from previous votes, with 38% of in-credit
customers rating it great (it was previously 35%). Though its "poor" rating has slipped to 19%, from 15%.
We didn't split out the Reward Account in our bank account poll, the results here are for all Halifax accounts.
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How long will it pay out the fivers for?
This is only a good deal so long as Halifax keeps paying £5 each month. From 1 May, if you're overdrawn, you won't get the bonus, but for those in credit, Halifax says this is a permanent feature which has been running for over two years, and it has no plans to change. However, it has the right to stop payments at any time.
What about tax on the money?
The monthly £5 payment is ‘interest after basic rate tax’, so non- or higher-rate taxpayers should claim extra or pay more via tax returns (see Interest Rates Guide).
BOOST this by £5/mth
If you get this
account you can also apply in branches or by phone for a Halifax Rewards Clarity
credit card, which pays £5 every month you spend
over £300 on it, and is also a top Travel
Money card. Set up a direct debit to
repay in full, to avoid the 12.9%
What if my salary drops?
If you miss a month's £750 pay-in, all that happens is you don’t earn the fiver, which can happen if you have a movable payday (see Halifax date change issues). You won't face any other penalties.
How much does the overdraft cost?
After six months at 0%, the charges skyrocket. You get a £10 buffer, but above that, for each day you are using an arranged overdraft, you'll be charged £1 if it's under £2,000, £2 for between £2,000 and £2,999, and £3 if more than that.
There is NO cap to these charges, making it a huge potential drain. And you'll no longer get the £5 bonus, even in months you're only briefly overdrawn.
Even more expensive is going into an unarranged overdraft - then you get hit with £5 per day, again with no limit to the fees.
Up to 3% interest & cashback on bills* Santander: You pay £2/mth fee - work out if it's worth it
- Min monthly income
- £500
- Apply*
- In-credit interest: 1% AER for balances over £1k, 2% over £2k, 3% for between £3k-£20k
- Cashback: 1% on water, council tax & Santander mortgage, 2% on gas & elec, 3% on phone, internet & TV
- Arranged overdraft cost: £1/day, capped at 20 days/month. 0% for 4mths after switching
- Unarranged overdraft fees: £5/day
The Santander* 123 Current Account charges a £2 per month fee, but switch to it and pay in £500/mth to get interest that beats the current Top Savings Accounts - 3% for those with £3,000 to £20,000 - plus cashback of up to 3% on bills paid by direct debit.
- In-credit interest: 1% on balances of £1,000+, 2% on £2,000+ and 3% on the whole amount if you've £3,000 - £20,000. Any extra above £20,000 gets no interest.
- Cashback rates: 1% cashback on water, council tax bills and repayments of up to £1,000/mth on Santander mortgages, 2% on some gas and electricity bills (depends on supplier), 3% on mobile, home phone, broadband and TV packages.
- Overdraft costs: 0% APR for 4 months if using Santander's switching service. Then £1/day (max 20 days/mth) for arranged overdrafts. £5/day for unarranged overdrafts. Max £95 cost in any calendar month.
We crunched the numbers, and a 'typical' billpayer with a Santander mortgage could make £115 a year profit, before interest. Without the mortgage this drops to £50 (see MSE News: Santander 123 analysis). Bigger spenders can push it further - @KellyAJackson told us via Twitter:
"I have a 123 account and I'm getting about £18 per month back after my fee - it's fantastic. £6 just for paying my mortgage."
| Customer services poll (In credit) | ||
|---|---|---|
| Great | 63% | |
| OK | 28% | |
| Poor | 9% | |
| Date: Feb 2013 | Voters: 484 | ||
Customer service feedback
In our February 2013 poll, Santander's 123 account was one of the best rated, with 63% saying they got great service. The account's fairly new, so we split it out in this poll, but Santander's results have improved overall.
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You have to switch to it properly
To get these perks, use its account transfer service to move at least two direct debits and standing orders, and pay in at least £500/month (£6,000 salary). If you can't pay the monthly deposit, you won't earn the cashback in that month. Existing Santander current account holders can switch to this if they wish.
You also get a 0% overdraft for 4 months to help cover any direct debits that may come out of your account before the switch is complete. Don't get too used to it, as charges will rocket after.
How good is it?
We crunched the numbers on how this stacks up for low, average and high bill payers. After the fee, we worked out low users would be up by £47 a year, average users £115 and high users £226, even before savings interest's taken into account
The cashback works best for those who have a mortgage payment of around £1,000/mth with Santander - but even without the mortgage payment, anyone with high bills will be able to make money from this account, even after the fee is covered.
The table details how the account works for low, medium & high bill payers:
Santander 123 – cashback earned
| Type of bill | Cashback % | Annual cashback | ||
|---|---|---|---|---|
| Low bills | Typical bills | High bills | ||
| Water | 1% |
£3.10 |
£3.80 |
£5.20 |
| Council tax | 1% |
£9.50 |
£12 |
£28.40 |
| Santander m'gage* | 1% |
£30 |
£66 |
£120 |
| Energy | 2% |
£18.50 |
£26.40 |
£36.30 |
| Mobile phone | 3% |
£3.60 |
£13.20 |
£18 |
| Home phone | 3% |
£3.60 |
£7.10 |
£12 |
| Broadband | 3% |
£2.30 |
£3.80 |
£9.20 |
| Paid-for TV | 3% |
£0 |
£7.20 |
£21 |
| Fee | £24/year
|
|||
| TOTAL after fee | £47 |
£115 |
£226 |
|
*Santander mortgage payment cashback is capped at £10/mth. |
||||
5% in-credit interest plus 12 mth 0% overdraft*Nationwide:
- Min monthly income
- £1,000
- Apply*
- In-credit interest: 5% up to £2,500 in yr 1, 1% after
- Arranged overdraft cost: 0% 1st 12/mths, 50p/day after.
- Unarranged overdraft fees: £5/day (max £60/mth), £5 paid / unpaid item fees (max £35/mth). Total unarranged fees capped at £95/month.
Nationwide's* FlexDirect account gives 5% in-credit interest on balances up to £2,500 for the first year.
It also has a 0% overdraft for the first 12 months, and reduced fees of 50p/day for arranged overdrafts after that.
| Customer services poll (In credit) | ||
|---|---|---|
| Great | 66% | |
| OK | 28% | |
| Poor | 5% | |
| Date: Feb 2013 | Voters: 1039 | ||
Customer service feedback
In our February 2013 poll of banks' customer service, Nationwide came third from top, with 66% of in-credit customers saying they received great service (previously 61%) and 28% of customers rating it OK.
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How good is this account?
It's rare to see an account that is good for both in-credit and overdrawn customers. This account is fantastic for the first 12 months, but if you get it, you may want to switch to another account once the introductory offers have gone.
What if my income drops?
If your income reduces and you can't pay in £1,000 per month, you just won't receive any interest that month.
Also offers 0.5% cashback card
If you’re accepted, you'll be eligible for the Nationwide Select credit card. It gives 0.5% cashback, cheap overseas spending and other perks. More details in Cashback Cards.
FREE annual European travel insurance*Nationwide:
- Min monthly income
- £750
- Apply*
- Bank account
- In-credit interest: NONE
- Arranged overdraft cost: 18.9%.
- Unarranged overdraft fees: £15 paid / unpaid item fees, £20 usage fee (max £95/month).
- Travel insurance
- Cancellation: £5,000 (£50 excess)
- Personal baggage: £1,500 (£50 excess)
- Medical: £10m (£50 excess)
- Full info: Key Facts PDF Policy Wording PDF
Nationwide's* FlexAccount gives free European travel insurance for customers up to age 75 (max age 73 at account opening) who switch and pay in £750+/mth. You can pay £20/year to upgrade it to worldwide, or £30 to family cover.
If you have a pre-existing condition, contact Nationwide as you may need a medical before getting cover and a charge could apply. This account is also one of our top pick packaged accounts.
| Customer services poll (In credit) | ||
|---|---|---|
| Great | 66% | |
| OK | 28% | |
| Poor | 5% | |
| Date: Feb 2013 | Voters: 1039 | ||
Customer service feedback
In our February 2013 poll of banks' customer service, Nationwide came third from top, with 66% of in-credit customers saying they received great service (previously 61%) and 28% of customers rating it OK.
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How good is the insurance?
It's got good cover limits and a pretty low £50 excess, and is rated 'five star' by Defaqto. You can pay to upgrade to cover worldwide travel, or winter sports holidays.
If you open this as a joint account, both account holders are covered by the insurance - provided they are under 75 - and the policy will automatically renew each year, until 31 December in the year of your 75th birthday. For more details on how the insurance compares, see the Travel Insurance guide.
What if my income drops?
If your income reduces and you can't pay in £750 per month you'll won't be eligible for the free travel insurance. You should be notified if you're no longer covered.
Also offers 0.5% cashback card
If you’re accepted, you'll be eligible for the Nationwide Select credit card. It gives 0.5% cashback, cheap overseas spending and other perks. More details in Cashback Cards.
Best fee-paying bank account
This is just the best fee-paying bank account, and may not be the best one to suit your needs. See our Premier Current Accounts guide for a full overview of the best accounts.
£600 of high-end travel, mobile & breakdown for £120*Nationwide FlexPlus
- Monthly fee
- £10
- £120
year - Apply*
- In-credit interest: 3% AER up to £2,500
- Min monthly income: None
- above that
Nationwide's* FlexPlus is a packaged account where you pay a monthly fee and get 'free' insurance policies. It's one of our top picks - to see how it compares, see our Packaged Bank Account Analyser tool.
If you choose this account, you pay £120 a year for insurance for your family's smartphones (including iPhone 5), worldwide family travel insurance up to age 74 (usually costing double the account price alone) and UK & Europe breakdown cover. It's a lot cheaper than paying separately - IF you'll use the features.
Plus it comes with extended warranty cover for an additional 12 months on all new household electrical items between £50-£2,000. You'll also get 3% AER in-credit interest on balances up to £2,500, beating top savings accounts.
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-
Worldwide family travel insurance: Allows multiple trips worldwide and includes winter sports, business, golf and wedding cover. The cheapest you could normally get this for is £50, but for a top value policy like this you could pay over £130 per year (read the full Travel Insurance guide).
Cover is up to age 74, but those over 75 can be covered for a £50 premium. It'll cover you, children under 19 (or 22 if in full-time education) providing they live at the same address, and your partner, even if it's not a joint account.
The excess (the amount you pay towards the claim) is a maximum of £50. If you have a pre-existing condition, tell Nationwide as you may need a medical before getting cover and could be charged.
-
Mobile phone insurance: Covers repair or replacement after theft, loss or damage, insuring each handset up the to value of £1,000, so it'll cover all smartphones. The excess is a maximum of £100 for an iPhone.
Unusually, it covers the phones of all family members, provided they live with you - so maxed out, this gives serious value. See Mobile Insurance for more details. -
Britannia breakdown cover: For the UK and Europe including home assistance. Cover is for the person, and people travelling in your vehicle. On a joint account both account holders would be covered.
For more policy details, see the travel insurance, mobile insurance, and UK & Europe breakdown cover documents.
The debit card with the account has no fee or load for cash withdrawals abroad, making it a leading debit card for overseas use, but still has a 2% charge when using it for overseas purchases, so don't use it for this.
For overseas purchases, if you have the FlexPlus account, you're also eligible for the Nationwide Select credit card. It gives 0% load on overseas purchases, as well as 0.5% cashback, 20 months 0% on balance transfers and 0% on purchases for 12 months. See Cashback Cards for more details.
Customer service feedback
In our February 2013 poll of the nine big banks, Nationwide was 3rd, with 67% voting it great, 28% OK, and just 5% voting it poor.
Specialised alternatives
There are other options that may suit.
-
Can't pay in a set amount each month?
The Halifax* Reward account doesn't require regular monthly deposits, but unless you sometimes pay at least £1,000 in, you'll never earn any interest.
This account requires you to have a good credit score, so is suitable for those who have wealth but not those struggling. If that's the case, you can also try...- Basic bank accounts: These don't credit score you (though you need ID) as they don't offer overdrafts. Make sure you ask for their application forms, or you'll get standard ones for standard bank accounts, and then be rejected. Full help and tips in our Basic Bank Accounts guide.
- Credit unions: Fed up with banks? Some of the 500 credit unions across the UK offer bank accounts (all do savings & loans). There's the same £85,000 per person protection as banks. Find your nearest and full info in our Credit Unions guide.
- Have a high balance?
If your current account balance is consistently high, then three accounts will beat the top easy access savings accounts. One is Santander 123 above, which pays 3% interest on balances from £3,000 to £20,000 - though it does charge a £2/mth fee.
The other account is the FlexDirect account above, which pays 5% interest on credit balances, but only for the first year, and only on balances of up to £2,500. To get the interest paid, you have to fund the account (from a non-Nationwide source) with £1,000 every month.
Alternatively the Lloyds Classic Account with Vantage pays 3% AER in-credit interest on your whole balance if you've got between £3,000-£5,000 in it - provided you pay in £1,000/mth. If you even occasionally go overdrawn, the charges are huge,so avoid like the plague.
If you have a large balance, don't forget about savings safety
As we're discussing high balances, it's worth knowing you get the same protection as in savings if a bank went bust - the first £85,000 in each of these is guaranteed by the UK government. Read the Savings Safety guide for full details.
You shouldn't be keeping anywhere near that in one of these though, as the rates are rubbish! If you have a high balance - perhaps due to a house sale - try to sweep the money into a Top Savings Account as soon as you can.
Ethical bank accounts
Ethical current accounts - where providers behave ethically in terms of the environment, human rights and more - have jumped in popularity. Our main focus always is telling you the top deals based on what the accounts offer, but to match demand we've worked with Ethical Consumer to list the top accounts that also rate highly on their ethics.
Free travel insurance with ethical bankOr cheap foreign spending
See the graph on the right for what Ethical Consumer's ratings mean.
Nationwide: Free travel insurance.
Nationwide* gives free Europe travel insurance (up to 75) and has a decent customer service rating. Min salary: £9,600. See full details.
Customer service: 67% great, 38% OK, 5% poor.-
Norwich & Peterborough. Fee-free foreign spending.
Norwich & Peterborough BS has unbeatable debit card exchange rates, but you need to meet some requirements to keep the account fee-free. See Cheap Overseas Spending for full details.
-
Co-operative Bank. Ethical banking but poor retail.
Co-op's Current Account Plus doesn't offer much and you must pay in £800/month. However it is Ethical Consumer's top pick for its unique campaigning brand, though unexpectedly the score isn't great at 7.5, as it's lowered by Co-op's retail arm.
Customer service: 77% great, 19% OK, 4% poor.
Other high-scoring ethical account providers include Metro Bank, Leeds BS*, Cumberland BS and Coventry BS, though most of these are for locals only.
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Best buys: Top if you go overdrawn
Overdrafts are debts, and often they’re much more expensive than credit cards. So avoiding being overdrawn is always a good policy. The costs below strictly refer to going overdrawn within your limit. If you go beyond that, you’ll pay through the nose (see Avoid bank charges).
If you are overdrawn, don't just tackle the symptoms. Also try using the free Budget Planner, give yourself a Money Makeover to tackle its causes and check the tips to avoid charges in the Bank Charges Compared tool.
12 mth 0% overdraft*Nationwide: also 5% in-credit interest
- Min monthly income
- None
- Apply*
- First year overdraft: 0% EAR
- Arranged overdraft cost: 50p/day after year one
- Unarranged overdraft fees: £5/day (max £60/mth), £5 paid/unpaid item fees (max £35/mth). Total unarranged fees capped at £95/month.
- In-credit interest: 5% in year one on balances up to £2,500, 1% in subsequent years.
Nationwide's* FlexDirect account has a 0% arranged overdraft for the first 12 months, and reduced fees of 50p/day for arranged overdrafts after that.
Never stray more than £10 over your arranged overdraft limit, as there's a £5/day charge for each day you're over, capped at £60/mth. Nationwide'll also charge you £5 for each paid & unpaid use of the account.
There's no minimum monthly income needed to get the 12 month 0% overdraft, however, if you pay off your overdraft and get into credit, then you need to pay in £1,000 monthly to get any interest paid on your balance.
| Customer services poll (Overdrawn) | ||
|---|---|---|
| Great | 60% | |
| OK | 26% | |
| Poor | 14% | |
| Date: Feb 2013 | Voters: 1039 | ||
Customer service feedback
In our February 2013 poll of banks' customer service, Nationwide came third from top. For overdrawn customers, 60% said they received great service, 26% OK and 14% poor.
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How much does the overdraft cost?
For the first 12 months, your arranged overdraft will be interest free. After that, your arranged overdraft will cost 50p each day you're more than £10 overdrawn.
If you go over your agreed overdraft limit, Nationwide will charge you £5/day, capped at £60/mth. However, there's also a £5 charge for each paid/unpaid item, capped at £35/mth. Nationwide won't charge more than £95/mth in unarranged overdraft charges.
Both the arranged and unarranged overdrafts have £10 buffers, so you won't be charged if you're within these.
What if my income drops?
If your income reduces and you can't pay in £1,000 per month you just won't receive any interest that month - however, if your account's overdrawn anyway, this isn't a problem.
0% overdraft for 6 months - big charges after*Plus £100 to switch
- Min monthly income
- NONE
- Apply*
- First six months overdraft: 0% EAR
- Arranged overdraft cost: Up to £2k: £1/day. £2k-£2,999: £2/day. Over £3k: £3/day; £10 buffer
- Unarranged overdraft fees: £5/day
- In-credit interest: £5/month (AFTER tax), for each month you pay in £1,000 ( explanation).
The Halifax* Reward account offers a 0% overdraft for the first 6 months, plus £100 for switching. Yet beware overdraft charges after six months. There's a £10 buffer, but above that charges skyrocket to £1-3 per DAY - use the overdraft as short-term respite, and plan to clear it before the 0% ends.
The maximum overdraft Halifax gives is £5,000, but the limit depends on your credit score, and it doesn't automatically match overdrafts that you're switching. NEVER, EVER go over your agreed limit - that costs £5/day, even in the first six months.
| Customer services poll (Overdrawn) | ||
|---|---|---|
| Great | 15% | |
| OK | 40% | |
| Poor | 45% | |
| Date: Feb 2013 | Voters: 104 | ||
Customer service feedback
In our February 2013 poll of the top banks, Halifax was rated 'poor' for service by 45% of people who are usually overdrawn. This contrasts with 40% of people in credit, who rate the account 'great'. However, this is for all Halifax accounts, we didn't split out the Reward Account in the poll.
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How much does the overdraft cost?
After six months at 0%, the charges skyrocket. You get a £10 buffer, but above this for each day you are using an arranged overdraft, you'll be charged £1 if it's under £2,000, £2 for between £2,000 and £2,999, and £3 if more than that.
There is NO cap to these charges, making a huge potential drain.
Even more expensive is going into an unarranged overdraft - then you get hit with £5 per day, again with no limit to the fees.
How do I get the £100 switching bonus?
Simply use Halifax's switching service to switch two or more direct debits or standing orders to your new Halifax account. This can be done in branch, online or over the phone.
£5/month bonus in months you're not overdrawn
Pay in £750 and you'll get a monthly £5 bonus. But any month you go into your overfraft, even if it's only briefly, you won't get the fiver.
What about tax on the money?
The monthly £5 payment is ‘interest after basic rate tax’, so non- or higher-rate taxpayers should claim extra or pay more via tax returns (see Interest Rates Guide).
What if my salary drops?
If you miss a month's £750 pay-in, all that happens is you don’t earn the fiver, which can happen if you have a moveable payday (see Halifax date change issues). You won't face any other penalties.
Small 0% overdraft if income's £1,000+/mthFirst Direct: £100 intro bonus, only interest free to £250
- Min monthly income
- £1,000
- Apply
- In-credit interest: NONE
- Arranged overdraft cost: 0% up to £250, 15.9% above that
- Unarranged overdraft fees: £25 paid item fee or unpaid fee of £0, £10 or £25
| Customer services poll(Overdrawn) | ||
|---|---|---|
| Great | 80% | |
| OK | 12% | |
| Poor | 8% | |
| Date: Feb 2013 | Voters: 129 | ||
The First Direct 1st Account charges 0% interest on the first £250, but shoots up to 15.9% EAR above that. New customers also get a £100 intro bonus (changes to £100 on 30 April 2013) when they switch to it.
Customer service feedback
In our February 2013 poll of the top banks, First Direct again came top for customer service, although only 80% of people usually overdrawn on their account thought the customer service 'great' compared with a huge 93% of 'usually in-credit' customers.
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How to get the perks
You must transfer a salary of at least £1,000 a month and switch at least two direct debits and standing orders. If you do this within three months the £100 will be added to your account within 28 days of the criteria being met.
It pays no in-credit interest, but in most feedback on customer service First Direct rates very highly. Due to this, it also offers £100 if you switch away within a year, if you've maintained the monthly £1,000 deposits.
What if my salary drops?
If your salary reduces and you can no longer pay in £1,000 per month you'll be whacked with a £10 monthly fee.
However, if you have another account with First Direct - savings or a mortgage - then the fee is waived, even if you don't pay in £1,000. If you've more than £40,000 in ISA savings, check out the First Direct Cash ISA.
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How to cut overdraft costs
One option is to get the 0% overdrafts above. However for many people, the cheapest option is actually to shift the debt to a cheap credit card. Usually, the easiest way to do this is by using a simple technique.
- Step 1. Apply for a cheap 0% card for spending on.
With a 0% card for spending on, everything you spend on that card is then at a cheap rate. - Step 2. Use that credit card instead of a debit card/taking cash out.
Now use the credit card for your normal day-to-day spending, making only the minimum monthly repayments on it. This means your monthly income pays off your overdraft as there's no money being taken out of that account. Instead the debt builds up on the credit card, but at 0%. - Step 3. Stop using the card once your bank account is in credit.
Doing this is technically the best solution for those with self-discipline - you can’t allow yourself to spend more on this card or build up more debt. You should stop using the card once your account is in credit, and try to pay the card off by the end of the 0% period. Or, at the worst, shift it to a cheap balance transfer deal.
A tip to save you cash if you mix ’n’ match
If you jump regularly between being in credit and using your overdraft, it's sensible to keep as much money in your account for as long as possible. Therefore, if you’ve the self-discipline, set all your household bills, direct debits and other standing orders to leave your account towards the end of your working month, artificially boosting your balance.
If you fear this may lead to money needed for bills being spent before it’s needed, don’t take the risk. Also, take a read of the Budgeting guide to help manage your cash flow.
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