Alliance & Leicester relaunched its £100 reward deal this week, whereby new customers switching to its Premier Current Account get a £100 reward. But is this the best place for your money?
If you are regularly overdrawn, then yes, it's a good deal. You get the £100 regardless of whether you are in credit or not, as long as £500 a month is paid into the account. The overdraft service is also currently top of the best-buy tables. For the first year your overdraft is interest free, and after that you'll be charged 50p a day capped at a maximum £5 a month.
But if you are usually in the black, this isn't the account for you. There are three decent current-account options at present. Halifax and Bank of Scotland both offer Reward Current Accounts, which pay you £5 a month, Alliance & Leicester and Abbey both offer accounts paying 6% interest, while FirstDirect will give you £100 for joining, plus another £100 if you leave after six months (see below).
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So which is best? As with so many things, the devil is in the detail. You need to look at your banking habits and work from there. If you pay over £1,000 a month into your account, but your average balance is much lower ie, your salary goes in, but the bills then go out leaving you with a fairly low average balance then the Halifax account is attractive. This is because you get £5 a month regardless of what your average balance is, adding up to £60 net of tax over the year.
However, if you have a higher average balance, then you might want to look at Alliance & Leicester's Premier Direct account, which pays 6% for the first year on balances up to £2,500. If you maintain a balance of £2,500 over that time, you would get interest of £120 after tax (£90 if you are a higher-rate taxpayer). That's a lot better than the £60 from Halifax. So if you can maintain a high balance in your current account, then Alliance & Leicester and Abbey beat Halifax. But if your average balance is around £1,500 or less (or roughly £1,300 or less for a lower-rate payer), then Halifax or Bank of Scotland is better.
However, most people would be better going for a straightforward £200 with FirstDirect. The bank is offering £100 to anyone who opens a 1st Account.It doesn't pay any in-credit interest but you get a £250 interest-free overdraft. Plus if you leave after six months you'll get another £100. The only drawback is that FirstDirect may actually be good enough that you won't want to leave a Watchdog survey last year found that 96% of FirstDirect customers would recommend the bank to others. But even if you don't leave you're still only £20 at most worse off than if you had chosen one of the other banks, and if you're a higher-rate payer £100 is better than you'd get from any of the other accounts. So if you're going to switch, we'd go for FirstDirect.
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