New Current Account

The Idea:
Halifax Bank Logo

This tag-line proves to be extremely accurate

The more committed followers may have noticed I have yet to post a new idea this week. This isn’t a sign that I’m running out of ideas, but rather that I have been busy executing those ideas I have already voiced. I am conscious that I need to avoid spreading myself too thin and negating the impact of any good ideas I may have. However, I have found a new idea that is well worth doing and needs very little effort. I am going to open a new current account, one that gives me a reward. Whilst many current accounts are moving towards actually charging a fee for the service, there are still a few out there that will reward you handsomely. There were two I looked at, and are the best currently available. First Direct pays £100 cash for switching to them and Halifax offer £50 for joining and then £5 per month. Each has a few stipulations, mainly that at least two direct deposits or standing orders have to be transferred to the account, and a minimum amount deposited per month. I eventually chose Halifax, one because I like the fact I will get a small continual revenue (as long as I meet the requirements each month and they don’t withdraw the offer – which they say they have no plans to do in the near future), and also because the monthly income is slightly lower at £750, rather than £1,000 at First Direct – Yes I need to be getting this at least if I am to be reaching my target, but it makes life a bit easier.

Investment Required

No investment is necessary, although there is a small hassle in terms of changing a few details – although most of this is taken care of by them. It only takes about 30 minutes to apply. Due to the fact I needed to transfer some Direct Deposits to qualify for the reward, and I don’t yet have any as part of this project, I have had to use personal ones. This isn’t much of an issue but means I will have to manage it tightly and move money around a bit. I may also have to manipulate money a bit from one account to another if I’m a little under the threshold – this is allowed, although probably frowned upon by Halifax. Hopefully that isn’t the case though and I’ll be soaring above that £750 threshold. All in all it will probably take an hour or two altogether over the year.

Capital: £0

Time(hrs): 2

Return On Investment

Fairly straightforward for a change.  Provided I meet the conditions, I will receive an upfront payment of £50 and then a £5 payment each month ongoing.

Projected ROI:  ∞%

ROI inc. labour:  708% (based upon minimum wage of £6.19/hour)

Expected Return: £100

Skills/Resources Required

A credit check is carried out and obviously the minimum earnings threshold apply – although it can be worked around by rotating money a little. Other than these limitations it is very easily done.

Howard Halifax singing legend

Remember him? No doubt Howard would be proud

Risk

Because no investment has been made, very little risk is present. There is the possibility that I don’t meet the conditions one month for one reason or another, but even then it will only cost me that months £5, or worst case scenario the £50 as well. Whilst it would be disappointing  I would not have lost anything.

Scalability

It can only make me the £50 and then £5 a month, perhaps more if I end up not breaking the tax threshold this year – and fill out a load of forms to get the small amount of tax back on it. As such it is a limited project. I don’t know the rules on whether I could also open the  First Direct account and get the bonus from both by moving money around well enough. Possibly worth looking into, although it might end up being more effort than it’s worth to manage it all and would leave me falling foul of both and receiving no income from it at all.

Viability

Given the limited input compared to the reward, this is clearly a good prospect. I also like the element, however small, of an ongoing passive income. The more I can begin to build of those the quicker ‘the stash’ can start to grow, especially as they accumulate. Whilst it’s not really what I’m worried about right now, it’s always worth looking to the future – this can keep going on past this year and possibly into other phases that may arise in this project. I’ll definitely go ahead with it, and in fact have already applied for the account.

The Verdict

ThumbsUp

Update 12/06/2013: I recently calculated the long term effects of choosing this current account over one that pays you nothing, in response to people who said things like: “it’s not really worth my effort for £5 a month” or “This just seems a little pointless”. It’s not a life changing sum of money I agree, but in my opinion these results show it is certainly worth the couple of hours it will take to set up.

 Yearly EarningsCumulative Total
Year 162.33 (exc. bonus)112.33
Year 264.19176.52
Year 366.12242.64
Year 468.10310.74
Year 570.15380.89
Year 672.75453.14
Year 774.42527.56
Year 876.65604.21
Year 978.95683.17
Year 1081.32764.49

Certain assumptions are made for this calculation. Namely that the money is invested immediately at an average return of 3% per annum. Also that the £5 bonus continue indefinitely. This is fairly unrealistic, so I also showed the effects if the bonus is ended after 2 years. This still gives a total of £217.28 after 10 years. See my full workings here.

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