Is it permissible to benefit from the incentives offered for switching to a Reward Current Account with Halifax?
The answer
After reviewing related documents and speaking personally to Halifax regarding the Reward Current Account, we are of the opinion that it is permissible to receive the £125 from Halifax for using the Current Account Switch Service. However, the £5 monthly rewards are impermissible and a form of interest.
Condition: The £125 switching incentive is allowed, but the £5 monthly rewards are interest.
Fiqh basis
The £125 is an incentive to customers in order for them to opt Halifax for banking. It is a unilateral payment not in lieu of any counter-exchange. Thus, it does not fall under Riba (interest).
In order to receive £5 a month, the primary conditions are:
- Pay in £750 or more
- Pay out at least 2 different direct debits and stay in credit.1
According to Shari’ah principles, a deposit in a bank is a loan to the bank. Thus any conditional incentive in lieu of such a deposit, whether material gifts, financial incentives, services or benefits falls under the famous and accepted legal maxim which states,
“Every loan which incurs a benefit is interest (Ribā).”
Thus, the £5 reward is conditional to the £750. One is loaning £750 monthly to a bank and receiving £5 reward in return. This is a form of interest.
If one cannot opt out from such a scheme and happens to receive payments, he should switch to an account which does not involve this reward scheme.
And Allah knows best.
Mufti Faraz Adam
References
1http://www.halifax.co.uk/bankaccounts/current-accounts/reward-current-account/ (accessed 25/02/2016)
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.