Santander has announced that on 1st November it will be halving the interest rate on its Santander 123 current account to just 1.5% rather than 3%.
When I heard the news this morning I almost shed a tear. Okay, not really, but still. I only opened a Santander 123 account a few months ago. Since then I’ve been consistently making a decent amount of interest every single month. I’m making more interest in a month than I used to earn in a year when I saved all my money in a pitiful cash ISA!
Following the rate cut announcement, a lot of people are wondering whether the account is still worth having, especially since it charges account holders £5 a month.
Whether it’s still worth it or not depends on the following:
- The amount of money you have in the account
- Whether or not you make good use of its cashback offering
- Whether or not other banks slash their rates too
If you use the account to earn cashback on your bills and you have a decent amount of cash to save, the account probably will still be worth having.
But first – take a look at the other accounts available to see whether you can earn more with them.
Depending on the amount of money you have and what you’re looking for, it may be worth taking money out of your Santander 123 account and using it to fill the other accounts first.
Which other accounts offer a decent amount of interest?
- 4% interest if you have between £4,000 – £5,000
- You must fund the account with £1,500 each month (if you don’t do this, you’ll pay a £5 fee)
- You must have two direct debits leaving the account each month
Nationwide Flex Direct
- 5% interest on up for £2,500 (but only for a year – after this the interest rate drops to 1%)
- You must put £1,000 in the account each month to get the interest
- No direct debits needed
TSB Classic Plus
- 5% interest on up to £2,000
- 5% cashback on the first £100 you spend on contactless
- You must pay in £500 a month
- You must register for online banking to access interest
- No direct debits needed
Should Santander 123 customers switch to a different current account?
As tempted as you might be to leave Santander in a fit of rage, it’s probably not worth switching just yet. After all, the interest rate still stands at 3% (for balances over £3,000) until November. Make the most of it while you can.
There’s also a risk that the interest rates on other current accounts could drop too. Take it easy and see what happens.
Should Santander 123 customers open multiple current accounts?
Since I’m a big fan of having multiple current accounts at once, I think you should definitely look into your options.
If you have a lot of money in your Santander account and this is the only current account you have, it may be worth opening a TSB Classic Plus, Club Lloyds and/or Nationwide Flex Direct account as well.
Since the aforementioned accounts offer higher interest rates on smaller sums, it makes sense to move some cash over & fill those first, before you fill your Santander 123.
Make sure you regularly monitor your accounts
It’s always a good idea to regularly monitor your accounts to make sure you’re getting a good deal.
Unless you have a fixed interest rate, there’s nothing to stop your bank changing the rates on each account. Always keep an eye on your own account and keep an eye out for better offers elsewhere.
This is what I’m doing…
If you’re interested in knowing what I do, I have the following bank accounts:
- Santander 123
- Club Lloyds
- TSB Classic Plus
- Nationwide Flex Direct
- Halifax Reward
- Help to Buy ISA
Each month my salary is paid into one of the accounts above.
I have several monthly standing orders set up so that money is transferred from my pay day account into the other accounts. A few days later, this money is moved back again.
Although I’m disappointed about the Santander 123 rate drop, I probably won’t change much just yet. I won’t be closing any accounts or switching to others. I’m going to wait and see what each bank does first.