Santander has just unveiled a new current account, called the 123 Current Account, that states it will pay cashback on any basic household spends, and offers up to 3% interest on all credit balances. So what is this new account all about, is it all that different from other current accounts on the market, and are there any pitfalls? We looked at it more closely to find out. Santander’s new account is called ‘123’ because it pays cashback of 1% on any money you spend on water and council tax bills that come out of this account. This rises to 2% of money you spend on electricity and gas bills, and 3% of money you spend on mobile, home phone, broadband and TV packages. Another reason the account is called 123 is to do with the way interest is paid on the account. Any credit balance will accrue an Annual Equivalent Rate (AER) of 1% on the entire balance, then, as soon as your balance hits £2,000 or more, you will start to earn interest of 2% on the entire balance. Then, when it reaches £3,000, the interest rate jumps to 3% on the entire balance. All interest and cashback allowances are paid directly into your Santander 123 Current Account every month and the interest is calculated on a daily basis.
Santander has now closed its Preferred Current account which paid 5% on balances of up to 2,500 and the £100 cashback account is now closed to new customers. Meaning the Everyday Account (a basic current account) and the 123 account are the only two accounts open to new customers. So are there any pitfalls? Well, although you only have to credit a minimum of £500 a month into the 123 account, it does cost you £2 a month to run it. And, if you go overdrawn in an arranged overdraft, you are charged £1 a day, capped at £20 a month. If you go overdrawn into an unauthorised overdraft however, the charges are steeper at £5 but this is also capped at £95 per month. Paid item fees where the bank authorises payment with insufficient funds are charged at £5 per item, and unpaid item fees, where the bank does not authorise payment due to insuffucient funds are £10 per item. This is actually comparable to other current account charges which stand at around £25 per unpaid item. The other downfall is that if your balance falls below £1000 on any day of the month, you will not earn interest at all on the entire balance for that day. Conversely, if your balance exceeds £20,000, the interest you earn will not increase from the maximum of 3%.
Therefore, if you are the kind of customer who stays in the black, does not go overdrawn, and keeps a balance of around £1000 in their account at all times, we feel this would be a good account for you to test out. However, keep in mind that in the first 6 months of last year, customer service complaints were at an all time high of 6,434, but they are slowly going down, in the last 6 months of last year they stood at 6,202 complaints. It does seem that on the surface, this is a pretty good option for those who want to save a little and get a bit more back from their banks, via a normal current account. Worth testing out for a few months we think. And don’t forget, that if you nab one of Santander’s 123 credit cards, you can also profit on other spending too. This credit card happens to pay cashback at a rate of 1% on supermarket spend, 2% at department store spend and 3% at petrol stations which is capped of £9.00 a month. If you have a Santander 123 current account, why not drop us a line and let us know what you think?