It’s not been a good year for many reasons financially. For Santander 123 current account holders however, it’s got even worse. Since it’s opening in 2012 the 123 current account from Santander has been a great way of getting money back in interest, despite a £5 account fee.
However Santander has announced that its 1.5% interest rate on 123 balances, along with the potential 3% unlimited cashback you can get from bills using this account, was reducing.
Santander 123 current account – No longer worth fee after rate cuts.
Back in mid-January, Santander announced they would cut the interest rates to 1% for the fee paying Santander 123 current account. They’d also cap the cashback payout on bills and mortgages etc to just 1% from the 5th of May 2020. This is a complete game changer for somebody using the account. Mainly due to the fact if you were getting large amounts of cashback on the household bills via their 3% cashback offer, they would drop by 66% in cashback value!! This loss of cash back earnings would apply to mobile phone, home phone, broadbands and paid TV services.
Simply put, for most, the Santander 123 current account was no longer worth the amount they’re paying for it in terms of rewards recouped. But, it gets worse. Read on…
Santander 123 current account – Rate drops to 1% now and 0.6% in August.
As the May 5th 2020 rate cuts for Santander 123 current accounts came into effect, a new bombshell dropped. That’s right, another rate drop! This time Santander are reducing their interest rate on balances down to 0.6% from August 2020. Cashback remains capped at 1% and is unchanged. Maximum interest that you can earn on the Santander account is now £200 per month, down from £300. When the August rate cut kicks in this will be reduced further to just over £100 a year.
With this rate drop there is very little incentive for people to stay with a Santander 123 current account. They are most likely going to be paying more for the account and they are recouping over the month. Afterall, a £5 monthly account fee on the Santander 123 current account isn’t the cheapest.
What Santander account should I switch to?
When savers look at how much the top current accounts pay on interest at the moment they’ll see that the new 0.6% rate is nothing to brag about. Most of the top savings accounts pay around 1% to 1.2% and in most cases that’s after those banks have already cut their rates.
Simply put, I would be jumping ship on Santander straight away however if you wish to stay with Santander the best option may well be a Santander 123 Lite Account. With the Santander 123 Lite Account customers will get the same cashback that they would have with the premium fee paying 123 account. But, this time they will pay just £1 per month for the privilege, saving them £4 per month or £48 per year in account fees.
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