Santander improves the interest rate on 123 flagship current accounts
Santander UK has increased the rate of its 123 flagship accounts as competition between providers intensifies.
The annual credit interest rate on current 123, Select and Private accounts has been increased from 1.50% to 1.75% on balances up to £20,000.
The new interest rate will apply automatically from Tuesday, meaning customers can now earn up to £347.22 in interest a year, on top of any cashback they earn on certain household bills paid by direct debit.
The previous rate was 1.50% and it has already been increased several times this year. It had already been reduced several times, during years of low interest rates.
Cashback on household bills through the 123 accounts is capped at £5 in each of three different cashback tiers.
Customers can earn 1% cashback on municipal tax bills, mobile and home phone bills, broadband and pay TV packages, and monthly Santander mortgage payments.
They can receive 2% cash back on gas and electricity bills, Santander home insurance premiums and Santander life insurance premiums.
They can also receive 3% cashback on water bills.
There is a £4 monthly charge for accounts and Santander said this will remain unchanged.
Santander said the interest rate on its 123, Select and Private checking accounts is variable and does not follow the Bank of England’s base rate.
The Bank of England raised the base rate to 3% last week, marking the latest in a series of increases. Many savings providers have improved their rates in recent months and some current account providers have also increased their money-for-change offers.
On Monday, HSBC UK launched a current account switching offer of £200. The Nationwide Building Society is also offering £200 for change.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “As interest rates continue to rise, it’s good to see providers improving their current account offerings to attract new business.
“A credit interest paying current account can be a convenient way for consumers to earn interest on their credit balance and Santander’s offer has a high threshold of £20,000 unlike some of its peers.
“Apart from checking accounts, customers can earn even more interest using an easy access account, for an account with unlimited withdrawals with just a £1 deposit, they can earn 2.52% gross with Tandem Bank, which has a maximum investment of £250,000.
“Consumers looking for current accounts with benefits may find Santander’s cashback offer appealing, particularly in a cost of living crisis where every penny counts, but it’s capped at £5 a month for each category.”