Santander is set to up its fees considerably on its 123 current account. From January 11th 2016, customers will have to fork out £5 a month up from £2 a month - or £60 annually up from £24 - an increase of £36 over the year.
So some account holders may find this is no longer best value for money. “News that Santander plans to charge three million 123 current account customers £60 a year is disappointing to say the least - this is a 150% increase. It seems this ‘venus fly trap’ was a great catalyst for the current account switching market but now they’ve got people on board it’s becoming less of an attractive deal from January," says Hannah Maundrell at Money.co.uk. "Charges are also increasing on the 123 credit card and new customers will have their cashback capped too."
Should I switch accounts?
However, the current account still offers up to three per cent in credit interest – a decent amount as long as there is enough money in the account to avoid the monthly charges cancelling it out. It’s also continuing to offer cashback on household bills and Santander monthly mortgage payments up to three per cent.
Anyone with a balance smaller than £4,500 would be better moving their money
“For savers, our 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 £75, - the equivalent of 1.66 per cent interest – which beats the amount you could get in a regular savings account,” says Kevin Montford, head of banking at MoneySuperMarket.com.“However, anyone with a balance smaller than £4,500 would be better moving their money into the highest paying savings account – ICICI Bank pays 1.65% on its HiSave SuperSaver Savings Account, so you would get more for your money this way.
“As these changes don’t come into force until 11th January 2016, there is a considerable amount of time for savers and cashback earners weigh up the options and work out whether the account is still the right one for them,” adds Kevin.
Shortly after Santander's announcement, Tesco axed its £5 fee on its own current account for new and existing customers from this Thursday in a bid to grab market share from the former. The bank also dropped the £750 monthly deposit as a condition of opening an account. The account pays 3 per cent AER on balances up to £3,000. Plus you collect Clubcard points when you buy with your debit card.