14th September 2015
Santander, one the UK’s largest banks, is increasing the fees on its flagship current account by a massive 150% from next year.
News emerged today that the bank will raise the monthly fee on its 123 account from £2 to £5 with effect from 11 January 2016.
The account, which offers 3% interest on balances from £3,000 to £20,000, has been the stand out performer when it comes to current account switching. In the year to 31 December 2014 it enjoyed a table topping 186,183 net new customers.
Someone with the maximum £20,000 eligible credit balance earning 3% will still earn £600 per year before tax in credit interest and compared to savings accounts is still getting a good deal despite the extra £36 in annual charges.
But from January for smaller savers, the news of the fee hike is likely to dampen its appeal.
Andrew Hagger of Moneycomms said: “For those with smaller balances it could be more of a game changer – if you have a £3,000 balance you’ll earn £90 per year pre tax – £72 after 20% tax, but will be paying out £60 in fees – thus giving you just £1 per month benefit.”
Nicolas Frankcom, money expert at uSwitch.com, added: “An almost threefold increase in fees is a huge kick in the teeth for Santander 123 customers.”
“Many will feel cheated by Santander moving the goalposts, and those drawn in by tempting cashback offers will have to spend more on household bills just to break even. However, it’s worth noting that Santander still pays a respectable 3% interest on balances between £3,000 and £20,000.”
In addition to the rise in current account fees, Santander has also increasing fees for its credit card, which will rise from £24 to £36 a year.
The card offers 3 per cent cashback and while existing customers will see no change to the amount of cashback they can earn, they will have to pay an extra £1 per month fee, at £3 instead of £2.
He added: “To soften the blow and potentially offset the additional financial outlay, Santander is reducing its 2.95% charged on overseas transactions to 0% until 31 December 2016.”