Halifax customers old and new: Prepare for changes

Whether you are an existing customer with Halifax, or were thinking of switching your current account over to the bank, you’ll need to know about some important changes which kick in from today (May 1).

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The good news is that, from this date, the bank re-launched its £100 switching offer. This means that if you transfer your existing current account to any of those offered by Halifax – and transfer all of your active direct debits (at least two) and other regular payments – you will be paid £100 into your account as a thank you. The offer runs until July 7.

But if you are already a customer with either a Halifax Reward Current Account or Ultimate Reward Current Account, previously-announced changes also take effect from 1 May – and these could be less favourable. We take a look at these in more detail.

Halifax Reward Current Account

What it used to offer

Previously, the Halifax Reward Current Account gave customers £5 for every month £1,000 or more was paid in. You received this payment no matter whether you were in credit or are using your overdraft.

But if you did go into your overdraft, there was only tiny £10 fee-free overdraft buffer. Anything over that would have been hit with the following charges:

  • £1 a day on amounts up to £1,999.99
  • £2 a day on amounts between £2,000 and £2,999.99
  • £3 a day on anything over £3,000

Note that this only applied to planned overdrafts. If your overdraft was not prior agreed, you'll have paid much higher daily fee of £5 (there was still a £10 fee-free overdraft buffer).

What's changing?

From May 1, the £5 monthly reward will only be paid if you are in credit. In other words, if you dip into the red, you'll forfeit the £5.

Overdrafts will be charged in the same way as before, with one exception - the fee-free overdraft buffer on planned and unplanned overdrafts will rise to £50.

In addition, Halifax is lowering the amount you are required to fund the account with each month from £1,000 to £750. But at the same time, you will need to have at least two direct debits set up on the account.

Halifax Ultimate Reward Current Account

What it used to offer

The Ultimate Reward Current Account used to charge a monthly fee of £15. But, as long as you paid in £1,000 each month, the fee dropped to £10.

In return for this fee, customers would have benefitted from a £300 fee-free overdraft. If you went over this, you would have been charged as follows:

  • £1 a day on amounts over £300 up to £1,999.99
  • £2 a day on amounts between £2,000 and £2,999.99
  • £3 a day on amounts over £3,000

Again, these charges applied to planned overdrafts only. Unplanned overdrafts were charged at a rate of £5 a day, although there was a £10 fee-free overdraft buffer.

The account still offers travel insurance, AA breakdown cover, mobile phone cover, home emergency cover and card protection.

What's changing?

From May 1, you will only qualify for the lower monthly fee of £10 if you DON’T use your overdraft. As a result, those dipping into the red will now be paying at least £15 a month for the account. 

Overdraft fees will remain the same but there will be a £50 fee-free overdraft buffer, up from the previous £10. However, this really only affects unplanned overdrafts as the first £300 of a planned overdraft is fee-free anyway.

The amount you are required to fund the account with each month will be reduced from £1,000 to £750 but you will need to have at least two direct debits on the account.

All other benefits on the account will remain the same.

Who will the changes affect?

Those customers who remain in the black - for whom these accounts are primarily designed - will be the least affected by the changes. After all, the amount Halifax is asking customers to pay in each month is coming down, not going up. And many of us have at least two direct debits set up on our accounts anyway.

But it's those of you who regularly use an overdraft who will be penalised, potentially losing out on £60 a year. That said, if you have the Ultimate Reward Account, regularly dip into the red and make good use of the added perks on the account, such as travel insurance, paying £15 a month may seem like a fair trade.

However, if you don't make use of the perks, it may be worth switching to a new current account. Below, we've highlighted some options.

Overdrafts of £300 or more

If you need an overdraft of £300 or more, it's worth asking Halifax to downgrade your account to the Reward Account. That's because overdrafts over £300 come with the same daily fees on both accounts, only with the Reward Account there's no monthly fee to pay on top.

But a better option might be to open the Nationwide FlexDirect Account instead, which offers a fee-free overdraft for 12 months. After this point, you'll be charged 50p a day on arranged overdrafts over £10, but this is still lower than the amount you'll be charged with Halifax.

Overdrafts of less than £300

If you have a fairly small overdraft, it's worth thinking about switching to First Direct's 1st Account which offers a fee-free overdraft of £250. Anything over this is charged an annual percentage rate (APR) of 15.9%.

You will need to pay £1,500 into the account each month or have another financial product with First Direct, such as a savings account. But you will receive £125 for switching to the account via MoneySupermarket and First Direct is renowned for its excellent customer service.

NOTE: The changes mentioned above don't take into consideration that, for a limited time only, those switching to the Halifax accounts will benefit from a six-month fee-free overdraft.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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