Halifax Reward Account paying £100 cashback

Halifax's new introductory bonus adds to the appeal of its Reward Account, which will already pay £5 per month - the equivalent of 5% AER or more for most people.

With Halifax's free Reward current account, customers can now get a £100 joining bonus on the first day of the switching process, and then £5 per month thereafter.

The Lloyds Banking Group's subsidiary says it saw 200,000 customers flock to it last year. Now it expects many more customers to overcome their fear of the current-account switching process, as it becomes the latest bank to bribe them out of their inertia.

Halifax's deal in detail

The cashback is not available to someone who wants to switch or upgrade their Halifax or Bank of Scotland current accounts. However, if you are an existing customer of Halifax or Bank of Scotland with a single or joint account, you can still open up the other type of account and get the introductory bonus. Also, you could get twice the reward if you open two single accounts instead of a joint account.

Subject to credit checks, you should get a fee-free and interest-free overdraft for three months, which will help reduce the chance of problems occurring during the switch over.

You will also get £5 per month after tax credited to your account, so long as you pay in at least £1,000 per month, but you will still get the £100 cashback even if you don't. Assuming your bank balance averages £1,500, this is the equivalent of 5% AER, although higher-rate taxpayers might have to pay £1.25 per month of that through their tax return.

Most people will average less than £1,500 in their accounts over the month, due to the balance falling closer to zero as you pay bills. This means that for most people the reward is going to be even higher than 5% AER. On an average balance of £750, for example, that's more like 10% AER! This compares very favourably with the best savings accounts, which currently pay around 3%.

How this compares to the other accounts with incentives

Santander and First Direct also offer introductory bonuses of £100, with Santander's rising to £200-£300 if you are or become either a mortgage customer or a mortgage and savings customer, although most people are still likely to be better off by comparing deals for other products elsewhere. Co-operative Bank stopped offering its £200 bribe last year due to an overwhelming response.

Unlike its competitors, Halifax will pay the cashback to you straight away, at the start of your switch. The other banks make you wait potentially several months.

Santander requires you pay in at least £1,000 per month to its Preferred Current Account to get its £100 cashback. In addition, the bank requires you move at least two automated payments to it.

On the flipside, the account could come with a decent-sized 0% overdraft for 12 months, subject to status, as well as 5% AER interest on balances up to £2,500, fixed for 12 months. If your balance averages above £1,500 per month this account could end up better for you than Halifax's, although it's admittedly hard to measure or estimate what your average balance might be.

When you open a 1st Account, First Direct requires you to pay in £1,500 per month to get its £100 cashback. If you don't, you will also have to pay £10 per month in account fees if you don't maintain an average balance of £1,500 over the month or have another First Direct product. You get paid no interest with this account, but account holders do get a £250 interest-free overdraft with no specified time limits.

First Direct is so confident you'll like its service – or that you'll be too lazy to switch again – that it will pay you another £100 if you decide to leave after six months but before one year, on the condition that you close down all your accounts with the bank.

More: Compare current accounts through lovemoney.com | Get a 0% overdraft | 12 brilliant balance transfer cards for 2012