Santander 123 account holders are set to be hit with an interest rate slash and cashback cap as of May 2020. 123 account holders currently receive 1.5% interest on balances of up to £20,000 and up to 3% on several types of household bills, in return for a £5 monthly fee.
The new changes, however, will see the interest rate slashed by a third to 1%, while cashback on bills will be capped at £15 a month. The cap will also affect Santander’s 123 Lite account customers and its select and private accounts.
The current cashback system involves three tiers. Account holders receive 1% back on water bills, council tax bills and Santander mortgage payments, 2% on gas and electricity bills, Santander home and life insurance premiums, and 3% on mobile and landline bills, broadband and TV packages. Under the new model, however, total cashback will be capped at £15 a month, meaning a £5 cap on each tier.
A new flat rate overdraft of 39.9% is also set to come into force from 6 April, which will replace the previous tiered daily fee overdraft model, although the bank said that customers using an unarranged overdraft under £1,065 would pay less compared to the previous tiered model.
Susan Allen, Head of Retail and Business Banking at Santander UK, said: “While we have had to make some difficult decisions in the current environment, 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.”