Santander 123 customer? You’ll now pay more

If you’re a Santander 123 current account or credit card holder, new fees have just kicked in...

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Santander has today (January 11) increased the fees on its 123 current account and credit card, meaning you'll now pay more if you use them.

The monthly fee on the 123 current account has increased from £2 to £5, while the monthly cost of the 123 credit card has risen from £2 to £3.

This is on top of changes made to the 123 credit card last year which capped the amount of cashback new customers can earn.

Why the change?

Santander is blaming the fee hikes on the rising costs of running a bank, caused by changes to banking legislation and regulation.

But if you’re a Santander customer, these changes could mean that it’s time to vote with your feet and switch to a better account.

Here’s what you need to know to work out whether the 123 current account and credit card are still the right choice for you.

What’s happened?

The 123 current account

New and existing customers

The monthly fee for the 123 current account has increased from £2 to £5 for both new and existing customers, meaning the annual cost of this account has gone up from £24 to £60.

However, you’ll continue to earn the same amount of interest and cashback as previously.

This means you’ll receive 1.00% AER (variable) if your balance is £1,000 or more, rising to 2.00% AER (variable) if you have £2,000 or more in your account.

Balances of between £3,000 and £20,000 earn 3.00% AER (variable).

In addition to this interest, you will receive 1.00% cashback on any Santander mortgage payments (of up to £1,000 a month) that come out of your account, as well as on any water and council tax bills.

There’s no escaping the fact that a steeper monthly fee will eat into your returns and any cashback you earn.

You get 2.00% cashback on energy bills and 3.00% cashback on your mobile, home phone, broadband and paid-for TV packages.

You must fund your account with £500 or more a month and have at least two direct debits on the account.

If you tend to be in the red more often than the black, the 123 current account offers a 0% overdraft for the first four months - this also remains unchanged. After four months, you’ll be charged a £1 daily fee when you’re overdrawn. (Overdrafts are subject to status and approval.)

Is the 123 account still worth it?

There’s no escaping the fact that a steeper monthly fee will eat into your returns and any cashback you earn.

But even once you factor in the higher charges, if you keep a high balance in the 123 account, you’ll still earn more in interest than you would from an easy access savings account.

Kevin Mountford, head of banking at MoneySuperMarket said: “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% interest – which beats the amount you could get in a normal savings account.

“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% AER (variable) gross on its HiSave SuperSaver Savings Account, so you would get more for your money this way.”

The 123 credit card

The fee on the Santander 123 credit card has increased from £2 a month to £3 a month for both new and existing customers, so annual charges have risen from £24 to £36.

The card now has a higher representative rate of 18.4% APR (variable)* (up from a representative rate of 16.5% APR (variable)**) due to the higher fee.

The card still offers 23 months’ interest-free on balance transfers and new purchases (the rate jumps to 12.7% pa after the 23 months are up), but how much cashback you earn depends on whether you had your card before September last year when additional changes were made.

If you had your card before September 16, 2015

If you had the 123 credit card before September 16, 2015, you’ll get 1% cashback on supermarket spending with no cashback limit, 2% on department store spending, again with no limit, and 3% cashback on up to £300 of your spending on transport, up to a maximum of £9 cashback a month.

You'll also earn 3% bonus cashback on card purchases made using Apple Pay (on spend of up to £100 per month) until February 29.

What’s more, as of today (January 11) and until December 31, 2016, you'll no longer have to pay the 2.95% foreign exchange fee on the card (which applies on transactions made overseas).

If you signed up after September 16, 2015 or you're a new customer

Anyone signing up for the 123 credit card since September 16, 2015 won't earn as much cashback.

You’ll only receive 1% cashback on spending up to £300 per month in supermarkets, 2% on spending in department stores of up to £150 a month, and 3% cashback on your spending on transport of up to £100 a month.

This means the maximum cashback you can earn in any month is £3 per spending category, so you can get a total of £9 a month overall.

You'll also earn 3% bonus cashback on card purchases made using Apple Pay (on spend of up to £100 per month) until February 29.

And there is no foreign exchange fee to pay until December 31, 2016 (when you'll pay 2.95%).

Is the 123 credit card still worth it?

If you had the card before September 16 last year, then the only change you’ll see from today is extra costs of £12 a year. While this is annoying, the cashback you can earn is unlimited, so you should soon be able to earn enough to cover this extra cost.

The card looks less attractive for those who took out the card after the cashback changes were made last year and new customers as you can only earn a maximum of £9 a month.

The foreign exchange fee waiver is useful however, especially if you regularly go abroad, but bear in mind it doesn’t apply to cash withdrawals, so you’ll still pay 3% (£3 minimum) every time you take out money from a cash machine. Plus, you will pay interest from the moment you withdraw your money.

*Representative Example: If you spend £1,200 at a purchase interest rate of 12.7% p.a. (variable) with a £36 annual fee your representative rate will be 18.4% APR (variable).

**Representative Example: If you spend £1,200 at a purchase interest rate of 12.7% p.a. (variable) with a £24 annual fee your representative rate will be 16.5% APR (variable).

All credit cards are subject to status and terms and conditions. Over 18s, UK residents only. Terms and conditions apply. See MoneySuperMarket.com for further information.

 Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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