11th January 2016
From Monday 11 January charges on the popular Santander 123 current account will more than double from £24 to £60 per year, affecting more than three million customers.
Given the price hike, experts are now urging customers to weigh up their options and if necessary vote with their feet and find a better deal.
Matt Sanders, current account spokesperson at Gocompare.com said those affected however should avoid just looking at incentives or best buy tables when shopping around for a new current account.
He said: “This is a substantial increase and as such customers who haven’t already should be seriously considering whether they’re getting enough back from the 123 current account to justify what they’re paying.
“Current accounts shouldn’t be considered as an off-the-shelf, one-size-fits-all product as everyone uses their account differently. While it’s easy to get lured by incentives, such as cashback or switching offers, it’s really important for consumers to look beyond these and instead consider how they actually use their account to decide where their money will be best placed.”
With the Santander 123 deal, customers receive 1% AER on balances over £1,000, 2% on balances over £2,000 and 3% between £3,000 and £20,000.
In addition the account also pays customers 1% cashback on water bills, council tax, Santander mortgage payments, 2% on gas and electricity bills and 3% on mobile and home phone bills, broadband and paid for TV packages.
Customers will continue to earn the same amount of interest and cashback on everyday spend as previously, so for those that keep a high balance in the 123 account, they will still earn more in interest than you would from an easy access savings account.
MoneySuperMarket calculations show that those with £4,500 or more sitting in their account will earn £135 in interest over the course of the year. Once the account fees are taken away, this still leaves £65 – the equivalent of 1.66% interest. However, Kevin Mountford, banking expert at the group said anyone with a balance smaller than £4,500 should consider moving their money into the highest paying savings account to get more for your money.
He said: “There has been plenty of movement in the current account space since the start of the year, with M&S Bank upping their switching incentive last week meaning customers could earn a possible £316 in the first year of owning an account.”
The Co-op Bank has also launched its Everyday Rewards current account scheme today, through which customers can earn up to £66 a year by adhering to simple banking practices, such as setting up at least four monthly direct debits and logging into online banking or their mobile app once a month, so there are plenty of other options out there to ensure you get the best overall value.
Mountford said: “With so many changes and new offerings coming into practice, working out whether you have the most suitable account can seem like a daunting task. However, there is decent money to be made so it is worthwhile weighing up all the options.
“The Seven Day Switching Service has made it easier than ever to change your bank account, and consumers should make the most of this and grab the best deals.”