Santander to double current account fee and tweaks cashback rates
From 27 October, Santander will double the monthly fee for the 123 Lite current account, taking it to £2 a month. However, it confirms the fee for the 123 Current Account will remain at £5 a month.
But it will change the cashback categories on its 123, 123 Lite, Private and Select Current Accounts.
It’s essentially switching the cashback rate customers can earn in two separate categories. Water bills currently attract 1% cashback but in October, customers will be able to earn 3%.
When it comes to communication bills such as phones, broadband and TV packages, customer bills paid via direct debit gain 3% cashback. But in autumn, this will be lowered to just 1%.
Santander confirms cashback on other household bills paid from these accounts (such as gas, electricity, council tax, etc.) will remain unchanged.
The banking giant said the changes are being made to address the increasing cost of cashback since launch in 2012, ensuring that its four million 123 customers can continue to benefit from cashback on their household bills in the current climate.
It said the banking industry has faced a number of challenges in recent months, such as historically low interest rates, the coronavirus pandemic and ongoing regulatory changes.
However, 123, Private and Select customers can earn 0.60% on in-credit balances of up to £20,000 (£119.60 per year maximum) and up to £180 a year in cashback on bills. This means they can earn up to £299.60 per year, though will need to pay £60 a year in fees.
For 123 Lite customers, they can earn up to £180 cashback on everyday bills each year, with an annual fee of £12, which will be doubled to £24 later this year.
This is the third tweak Santander has made to its current accounts, after previously announcing two interest rate cuts on in-credit balances up to £20,000 – from 1.5% to 1% then to 0.6%. It also introduced a cap on the household bill cashback element of the account – £5 for its three cashback categories, meaning a maximum of £15 can be earned each month.
Susan Allen, head of retail banking at Santander, said: “It has been a very difficult decision to make these changes to our popular 123 accounts but both the 123 and 123 Lite current accounts will continue to be good options for the large majority of our customers with the value they still offer.
“123 is the only account on the market offering both in-credit interest and cashback, while both 123 and 123 lite accounts give cashback on essential household bills paid by direct debit.”
Santander will write to all customers in July and August to explain the changes including information on how to make the most of cashback benefits and alternative account options for the minority of customers whose returns won’t meet the monthly fee.
Separately, Club Lloyds and Bank of Scotland Vantage customers will also earn a lower rate of interest on their current account cash from October, the banking group has confirmed today.