Halifax has launched a High Interest Current Account which pays 5.12% AER interest on balances up to £2,500 - which is 50 times more than many rival accounts.

Anything above £2,500 will earn interest at 0.1% AER.

So, if a customer had a £4,000 balance, £2,500 would earn interest at 5.12% and the remaining £1,500 would earn interest at 0.1%.

In order to qualify for the 5.12% rate you have to pay in at least £1,000 a month .

The bank hopes the move will increase the market share of the HBOS group (which includes Halifax and the Bank of Scotland) from 12% of current accounts to between 15 and 20%.

Halifax highlights that the big four banks - Barclays, HSBC, Lloyds TSB and NatWest/Royal Bank of Scotland - typically pay just 0.1% interest on mainstream current accounts.

Halifax claims that customers could get up to £1,065 extra over the typical life of a current account by switching to its new account.

The new account is available to both new and existing customers and can be accessed through Halifax branches, through the internet and by phone.