From 12 April, Santander will cut the interest rate on its 123, Select and Private current accounts from 0.6% AER to 0.3% AER on balances up to £20,000.

This means customers will be able to earn a maximum of £59.92, down from the current £119.60 per year maximum.

However, it will lower the fee on these account from £5 to £4 a month, meaning customers will be charged an annual fee of £48, rather than £60.

In total, customers will be able to earn up to £240 a year in interest and cashback for a £4 a month fee. They can also earn up to 15% cashback on credit and debit card spending at various retailers.

It will contact customers over the next month to explain the changes and they can check Santander’s online 123 calculator to see what they can earn once the changes take effect.

For those who will pay more in the monthly fee than they earn in cashback or interest, Santander said they will be provided with alternative current account options.

Santander confirmed there are no changes to the cashback on household bills element of the accounts, adding that it remains “the only bank to offer customers both in-credit interest and cashback on bills”.

There are also no changes to its 123 Lite current account where customers earn cashback on household bills only for a £2 a month fee.

Over the course of last year, Santander unveiled a number of changes to its current account products. In October, it doubled the 123 Lite monthly fee from £1 to £2 and changed the cashback categories on household bills for the Lite, 123, Private and Select current accounts.

It also slashed the current account interest rate offered on its 123, Private and Select Accounts from 1.5%, to 1% to 0.6%.

‘Difficult decision’

Susan Allen, CEO, retail and business banking at Santander, said: “With the Bank of England base rate remaining at its lowest level on record, and significant recent reductions in interest rates on current and savings accounts across the industry, we have taken the difficult decision to reduce the interest rate on our 123, Select and Private Current Accounts.

“However, by lowering the monthly fee, we’ve ensured the accounts continue to provide customers with long term, everyday value, and Santander remains the only bank to offer both in-credit interest and cashback on household bills.”