Current accounts that give you rewards
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So it’s happened: the Bank of England has raised the Bank Rate again.
This is the third consecutive rise and, with the Bank Rate now at 0.75%, the financial squeeze is definitely tightening – especially for borrowers.
Last week I wrote about the current accounts offering the best interest rates when you’re in credit.
It’s a great way to get a bit more out of your money for free, and all of the ones I’ve included offer better interest rates than the highest paying instant access savings account.
This week I’m going to cover a similar subject: current accounts that give you rewards.
The criteria for inclusion
Traditionally, current accounts that gave you extra perks have been known as packaged accounts.
This means for a monthly fee, you get things like travel insurance and breakdown cover thrown in.
In recent years however, there’s been a growth in reward current accounts.
These are basically accounts that offer cashback and other benefits, often in lieu of interest rates.
Although you still have to pay a fee in some cases, the cost is nominal and you pretty much always make a “profit” – these are the ones I’ve included below.
Tip: Do check whether they’re running a switching offer to sweeten the deal.
Halifax Reward – monthly cost £3 or free, reward £5 or other benefits
One of the longest running reward schemes is the Halifax Reward Current Account.
You pay £3 a month for the privilege, but this is waived if you can pay in £1,500 a month or more.
The money doesn’t need to stay in, but your balance does need to be more than £0.
To qualify for the reward, you need to spend £500 on your debit card each month or keep at least £5,000 in your account everyday of the month.
The rewards are: two digital movie rentals, three digital magazines, one cinema ticket or £5 credited into your account.
At the beginning of a 12 month period, you get to choose your monthly reward. This is then locked in for the next year.
If you opt for the £5 cashback and keep £5,000 in your account option, it works out to be the equivalent of 1.2%AER. Plus, rewards like these don’t count towards your personal interest allowance for tax.
Halifax also offers additional cashback when you use your debit card with selected retailers.
Danske Bank – monthly cost £2, reward £7
Less well known compared to the high street banks on this list, Danske Bank is still a major player – your money is protected under the Financial Services Compensation Scheme so it’s perfectly safe.
The reward on its Danske Cash Reward Current Account is actually pretty decent.
You get £7 credited to your account each month if you deposit at least £1,200 and log into mobile or internet banking.
There’s no need to have direct debits going out, or maintain a minimum balance.
The account costs £2 a month, leaving you with a tidy £5 profit.
Santander 1|2|3 and 1|2|3 Lite – monthly cost £4 and £2 respectively, reward is variable
Santander offers the 1|2|3 and 1|2|3 Lite accounts.
The Santander 1|2|3 Current Account costs £4 a month to maintain. It pays an interest rate of 0.5% AER on balances up to £20,000 and you can get up to 3% cashback on your bills.
The Santander 1|2|3 Lite Current Account costs £2 a month to maintain, pays no interest on in-credit balance but you can still get up to 3% cashback on your bills.
For both, you’ll need to pay in at least £500 a month but there’s no need to maintain a minimum amount of money in the account.
You’ll also get additional cashback by using your debit card with certain retailers.
The major pitfall of these accounts is that the cashback is capped at £5 per tier across three different tiers, which means you can only get a maximum of £15 a month and, from experience, it’s not always easy.
So before you sign up, make sure the cashback you get is higher than the cost of maintaining the accounts – Santander has a tool to help you estimate this.
And until Santander increases the in-credit interest rate on its 1|2|3 account to match the highest instant access savings account, the Lite option would work out better for more people.
Natwest Reward – monthly cost £2, reward £5 or more
Very similar to the Santander model is Natwest’s Reward Current Account.
It’s a fee-paying account that costs £2 a month to maintain and you have to pay in £1,250 every month – although there’s no minimum balance required.
You get £4 a month in rewards for having two or more direct debits – two of those need to be at least £2 each – and £1 a month if you log into the mobile banking app.
The rewards can be exchanged for cashback or gift cards.
You also get additional cashback at selected retailers if you use your debit card.
RBS Reward – monthly cost £2, reward £5 or more
The RBS Reward Current Account is exactly the same as the Natwest one.
You pay £2 a month to maintain the account, and need to deposit £1,250 every month – there’s no minimum balance required so you can take the money straight out if you need to.
If you have two or more direct debits – two of those need to be at least £2 each – you’ll get £4 a month. There’s also £1 a month if you log into the mobile banking app.
The rewards can be exchanged for cashback or gift cards.
You also get additional cashback at selected retailers if you use your debit card.
Barclays Blue Rewards – monthly cost £4, reward £7 or more
Barclays Blue Rewards is slightly different in that it’s a membership scheme – for £4 a month, you can join and link it to any Barclays current account.
The most straightforward one is Barclays Current Account, as this doesn’t have any minimum income requirements.
Once your current account is open, you’ll need to link it to Barclays Blue Rewards via online banking or the app.
To qualify for the rewards, you do need to deposit a minimum of £800 a month into the account – although the money doesn’t need to stay in.
In terms of rewards, you get £7 a month if you have two direct debits going out of your account.
All of the other rewards require taking out additional Barclays products, but you could earn more.
You get £5 a month for a Barclays mortgage, 3% cashback for home insurance, £1 a month if you have a personal loan and up to £5 a month if you take out life insurance.
Be sure to check that these are the most competitive options for you first.
Chase – monthly cost free, reward variable
The Chase Current Account is best for those who use their debit cards a lot as it gives you 1% cashback on most purchases for the first year.
It’s also on the current accounts with the best interest rates list because it pays 5% AER on round ups.
Plus, unlike most of the other reward accounts featured here, there’s no minimum deposit requirements, or the need to set up direct debits.
For the accounts below, I personally feel that the reward vs effort means it’s not worth it, but that doesn’t mean they won’t work for you.
Co-Operative Bank Everyday Rewards – monthly cost free, reward up to £2.20
Similar to the Barclays scheme, Co-Op’s Everyday Rewards scheme is one that you can link to any of its current accounts.
The Co-Operative Bank Current Account is the most straightforward and is fee-free.
To be eligible for the reward, you have to pay in at least £800 a month, be in credit and pay out at least four direct debits.
You also have to log into online banking and subscribe to paperless statements.
For that, you only get £1 for every eligible month. Then for each transaction, the bank will credit you 2p, up to a total of £1.20.
It means in total, you get just £2.20 in rewards.
It’s quite a lot of effort so this is only worth it if you are planning to make it your main bank account.
TSB Spend & Save and Spend & Save Plus – monthly cost free or £3, reward £5
TSB has two versions of its Spend & Save account, both giving a £5 monthly reward.
To get the reward though, you have to make at least 30 transactions using your debit card per month – so this is definitely not one for you if you tend to rely on credit cards for everyday spends.
The Spend & Save Current Account is the free version but the reward only lasts for the first six months.
There’s also a £3 fee every time you buy something and return it – for me this is not very consumer rights friendly as you’re basically being penalised if you’ve changed your mind or if the item is faulty.
The Spend & Save Plus Current Account costs £3 a month but you get the £5 reward indefinitely, there are no fees for returns and it’s free to use your debit card abroad.
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