Is this the DEATH KNELL for bank ac­counts with BENEFITS?

As San­tander copies its ri­vals and slashes perks on its wildly pop­u­lar 123 ac­count...

Daily Mail - - Money Mail - By Amelia Mur­ray

SAN­TANDER is slash­ing the benefits of its flag­ship cur­rent ac­count in a move that could de­prive mil­lions of cus­tomers of as much as £100 a year. The Span­ish bank, which has al­most four mil­lion cur­rent ac­count hold­ers, will cut the rate on its 123 ac­count from 1.5 pc to 1 pc in May, and cap its un­lim­ited cash­back of­fer to just £15 a month.

At the same time, it has be­come the lat­est bank to an­nounce it will be hik­ing its over­draft rate to 39.9 pc from April.

The move comes as big banks are scal­ing back their cur­rent ac­count re­wards — a string of its ri­vals have also re­cently cut in­ter­est rates and cash­back deals.

When San­tander launched the 123 ac­count in 2012, it quickly be­came one of the most pop­u­lar ac­counts on the mar­ket, of­fer­ing a de­cent in­ter­est rate on large bal­ances and up to 3 pc cash­back on house­hold bills. It was rec­om­mended as a best-buy by MoneySav­ingEx­pert’s Martin Lewis and ad­ver­tised on TV by Olympic ath­lete Jes­sica En­nis- Hill, and more re­cently TV pre­sen­ters Ant and Dec.

Ex­perts last night ac­cused San­tander of ex­er­cis­ing a ‘cal­cu­lated and cyn­i­cal’ plan, tak­ing ad­van­tage of cus­tomers who are un­likely to change banks.

Martin Lewis says: ‘San­tander 123 is now a dead duck cur­rent ac­count. There’s lit­tle rea­son for any­one to stick to it.

‘The irony is that, un­til this an­nounce­ment, San­tander 123 was primed for a come­back. For years it was one of my top picks for savers. In fact, only last week I sug­gested those who wanted easy-ac­cess sav­ings and had big bills to check it out.’

James Da­ley, founder of cam­paign group Fairer Fi­nance, says: ‘San­tander’s 123 ac­count was one of the best-value and most innovative ac­counts on the mar­ket when it launched eight years ago.

‘But, over the past few years, San­tander has slowly whit­tled away at the ac­count’s value — rais­ing fees, cut­ting in­ter­est rates, and now cap­ping re­wards. It’s hard not to see it as a cal­cu­lated cyn­i­cal plan. Cur­rent ac­count cus­tomers are well known to be re­luc­tant switch­ers — and very few of those who were brought in by the at­trac­tive fea­tures of the 123 ac­count will move their busi­ness else­where.’ THE

move is the lat­est in a line of cuts suf­fered by cur­rent ac­count cus­tomers else­where. Last Novem­ber, Na­tion­wide stopped pay­ing in­ter­est on its FlexPlus pack­aged bank ac­count. Pre­vi­ously, it paid 3 pc on bal­ances up to £2,500.

In July, TSB cut the rate of its Clas­sic Plus ac­count from 5 pc to 3 pc on bal­ances up to £1,500. This re­duced the max­i­mum an­nual in­ter­est cus­tomers could earn from £75 to £45.

NatWest is scrap­ping its 2 pc cash­back on house­hold bills from Fe­bru­ary. In­stead, the bank will now pay Re­ward Ac­count cus­tomers £1 a month if they log on to their ac­count via its mo­bile app, and a fur­ther £4 a month if they set up two di­rect deb­its, so capped at £5 when it was pre­vi­ously un­lim­ited. It also costs £2 a month.

Over the years, San­tander has chipped away at its cur­rent ac­count perks. In Jan­uary 2016, it in­creased its £2 monthly fee to £5, leav­ing up to a third of cus­tomers pay­ing more in fees than they re­ceived back from the bank each year.

And, in Novem­ber that year, it halved its rate from 3 pc to 1.5 pc. The dif­fer­ence in re­turns was sub­stan­tial. Cus­tomers with a £20,000 bal­ance went from earn­ing £540 a year to £240, af­ter ac­count fees.

But, from May, 123 cus­tomers and those with San­tander’s Se­lect and Pri­vate cur­rent ac­counts will also see rates re­duced from 1.5 pc to 1 pc on de­posits of up £20,000.

This will cut the max­i­mum an­nual in­ter­est earned from £240 (mi­nus the £5 monthly fee) to £140. A 123 ac­count holder with a bal­ance of £2,500 will earn £25 a year un­der the new cuts (and this doesn’t take into ac­count the monthly charge). By con­trast, Na­tion­wide’s FlexDirect ac­count pays 5 pc on bal­ances up to £2,500 as long as cus­tomers pay in £1,000 a month. This would yield £125.

San­tander is also cap­ping cash­back for 123 ac­count hold­ers at £5 in three cat­e­gories, so they can earn a max­i­mum of £15 a month. Cur­rently, cus­tomers can earn 1 pc on coun­cil tax and wa­ter bills plus San­tander mort­gage pay­ments. So some­one with a monthly £150 coun­cil tax bill would get £1.50 back from the bank.

Gas and elec­tric­ity, San­tander home insurance and life pro­tec­tion

pre­mi­ums earn 2 pc. And the bank pays 3 pc cash­back on mo­bile, land­line, broad­band and TV pack­age bills.

San­tander’s 123 Lite ac­count of­fers the same cash­back as the stan­dard 123 but for a £1 charge per month — rather than £5. This makes it the best cash­back deal on the mar­ket.

And you could stash ex­cess cash in an easy ac­cess sav­ings ac­count. Cyn­ergy Bank’s on­line ac­count pays 1.36 pc, so a £20,000 bal­ance would earn £272, and there are no fees.

Gold­man Sachs’ Mar­cus ac­count pays 1.35 pc.

San­tander is also the lat­est bank to an­nounce a hike in over­draft charges ahead of new reg­u­la­tions com­ing in April.

Cus­tomers with the 123 ac­count cur­rently pay £ 1 a day for bor­row­ing less than £2,000, £2 a day be­tween £2,000 and £2,999.99 and £3 a day on £3,000 and over. From April 6, th­ese fees will be re­placed with an an­nual in­ter­est rate of 39.9 pc.

The bank says cus­tomers with an over­draft of less than £1,065 will pay less than they do now — around six out of seven cus­tomers. How­ever, be­cause of the pre­vi­ous tiered sys­tem, some peo­ple could end up pay­ing more, de­pend­ing on how much they bor­row and how long for.

The Fi­nan­cial Con­duct Author­ity or­dered banks to scrap daily over­draft fees and charge through an an­nual in­ter­est rate. HSBC, and Monzo have al­ready said they will charge fees of up to 39.9 pc, while Na­tion­wide hiked rates to 39.9 pc in Novem­ber.

Su­san Allen, head of re­tail bank­ing at San­tander, says: ‘While we have had to make some dif­fi­cult de­ci­sions, our cur­rent ac­count range re­mains very com­pet­i­tive. Our 123 ac­counts pro­vide a range of benefits that we know our cus­tomers value and our goal is to en­sure th­ese ac­counts re­main sus­tain­able for the fu­ture.’ San­tander adds it will pro­vide de­tails of al­ter­na­tive ac­counts for the small num­ber of cus­tomers who will no longer earn enough in­ter­est and cash­back to cover the monthly fee.

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