27 June 2006
Halifax's decision to give current account customers 5% interest on credit balances up to £2,500 will act as a spur to the UK's biggest banks, according to an expert.
Nick White, head of personal finance at price comparison and switching website uSwitch.com, said that larger institutions were now under pressure to respond.
"Although the new Halifax account doesn't quite steal the top-spot from Abbey who pays 6%, it still piles on the pressure on the big banks who continue to offer a meagre 0.1% on credit balances," he said.
Customers with a monthly balance of £1,500 could earn £60 interest over a year, compared to just £1.20 from HSBC or Barclays which pay just 0.1% on credit balances.
Despite the higher interest, Mr White said that there were better deals available for those customers who often become overdrawn.
"These consumers may be better off opting for Alliance & Leicester's Premier Direct account which offers 0% interest for 12 months and 5.9% thereafter on an overdraft," he added.
"Increased competition in today's market, and the increasing willingness of consumers to shop around for a better deal, mean that those who are not happy with their current account can now do something about it by voting with their feet and switching to a better deal."
Need a new current account? Find the best current account for you with the uSwitch.com current accounts comparison service