Santander Set To Cut Current Account Interest Rates | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 14/01/2021

Santander has announced today that it plans to cut the interest rate on its 123, Select and Private Current Accounts from their current rates of 0.60% to 0.30%, which would mean customers depositing the maximum £20,000 would lose £60 per year in interest.

The interest rates on both these accounts are set to be cut on 12 April 2021. Santander has also revealed that it will be lowering the monthly fee on these accounts from their current amount of £5 per month to £4, which will save customers £12 over a 12-month period.

Explaining why Santander has decided to make these rate cuts, Susan Allen, CEO, Retail and Business Banking at Santander, said: “With the Bank of England base rate remaining at its lowest level on record, and significant recent reductions in interest rates on current and savings accounts across the industry, we have taken the difficult decision to reduce the interest rate on our 1I2I3, Select and Private Current Accounts. However, by lowering the monthly fee, we’ve ensured the accounts continue to provide customers with long term, everyday value, and Santander remains the only bank to offer both in-credit interest and cashback on household bills.”

Would Santander customers be better switching accounts?

With Santander cutting the interest rate on its 123, Select and Private Current Accounts, customers may be better off switching accounts.

Currently there are several current accounts that offer a rate that matches or beats 0.60%, although these accounts only pay interest on deposits significantly lower than £20,000, when factoring in the monthly fee, customers could be better off switching accounts.

For example, Virgin Money pays an interest rate of 2.02% on its Virgin Money Current Account, but interest is paid on balances of up to £1,000. This would mean customers with the maximum balance of £1,000 would get £20.20 in interest per year. There is no monthly fee on this account, but to open the account a linked savings account is needed. Someone with a Santander 123, Select or Private Current Account and who had the maximum deposit of £20,000 would earn £60 per year in interest after the rate cut. While this is more than the Virgin Money account, when the monthly fee is factored in, which is £48 over a 12-month period, customers will only earn £12 from the account per year. As a result, these customers would be better off switching to the Virgin Money Account, where they would earn £8.20 more per year.

Customers considering this should, however, factor in the savings they make using the cashback facility on the Santander accounts, and if they earn more than £8.20 over the year from this, they would be better staying with their Santander account.

Alternatively, Santander customers could consider opening an easy access savings account instead. The top rate in the easy access savings chart is currently 0.60%. This would mean deposits of £20,000 would earn £120 per year in one of the top-paying accounts. But, again, with an easy access savings account, customers would not benefit from the cashback incentive on the Santander current accounts, which, according to Santander, could earn customers up to £240 per year (including the 0.3% interest).

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