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Santander to increase charges on 1|2|3 products

Kit Klarenberg
Written By:
Posted:
14/09/2015
Updated:
14/09/2015

Santander will more than double current account fees and raise charges on credit cards within its 1|2|3 product range, it has been announced.

The increase means as of January next year, 3.8 million 1|2|3 current account customers will be charged £5 per month (up from £2 currently), and 1.9 million 1|2|3 credit card customers will pay £36 annually (up from £24 currently). The bank attributes the hikes to rising costs, low interest rates and the impending introduction of a cap on transaction fees.

Many consumers have found the perks offered by Santander’s 1|2|3 products appealing, as evidenced by the high number of ‘switchers’ it has attracted – the highest of any bank since the Current Account Switching Service was introduced in September 2013. Earlier this year, the bank achieved its target of securing four million customers for its 1|2|3 range.

Santander said the range’s cashback provisions will remain the same for existing customers, but some will be capped for new customers, with new limits imposed. A full guide to the changes to the 1|2|3 range can be found here.

Reza Attar-Zadeh, head of retail products at Santander, said: “Since launching the products, the financial landscape has changed significantly. External market factors mean we’ve had to make some changes to ensure the products continue to meet the needs of our customers, but also our shareholders. We’re writing to all our existing 1|2|3 customers and making sure we help them understand the changes and the options available to them.

“Both products continue to offer great value and the vast majority of customers will still be able to generate a good monthly benefit despite the changes. They will remain our flagship banking offers, and we expect them to continue to attract new customers and offer a competitive alternative for people wishing to switch banks.”

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Reaction from industry commentators was less upbeat. Nicolas Frankcom, money expert at uSwitch.com, described the increase asa huge kick in the teeth” for existing customers.

“Many will feel cheated by Santander moving the goalposts, and those drawn in by tempting cashback offers will have to spend more on household bills just to break even,” he explained.

“Santander didn’t win any of our customer services awards this year – it may be time for their customers to check how much they’re earning on the account and vote with their feet if they’re not seeing value for money. Competition in the current account market is hotting up, with more banks like Halifax, TSB and Clydesdale bringing in switching incentives, and lots of accounts on the market still offering high interest on balances.”

Andrew Hagger, director of Moneycomms, said while cashback returns and in-credit rates remained largely unchanged the increase in fees had taken the ‘shine off’ the account package, particularly for consumers with smaller balances.

“Someone with the maximum £20,000 eligible credit balance earning 3 per cent will still earn £600 per year in-credit interest and is still getting a good deal compared to savings accounts, despite the extra annual charge from January,” he noted.

“For those with smaller balances it could be more of a game changer. If you have a £3,000 balance you’ll earn £90 per year pre-tax, reduced to £72 after 20 per cent tax, but will be paying out £60 in fees – giving you just £1 per month benefit. There is of course the option to earn cashback on your utility bills on top of this but for those savers at the lower end of the scale the deal now looks less attractive.”

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