Santander 123 vs Santander 123 Lite review: Cashback current accounts compared

One of the easiest ways to earn a little cash is to get a cashback current account for your bills. But after recent changes, are these accounts still worthwhile?

There are lots of good reasons to change your bank, including cash bonuses, high interest, fee-free travel money and low-cost overdrafts.

One feature that’s also available is getting cashback on the bills you pay. So you could get 1% back on your Council Tax, or 3% water bills. It’s stuff we all pretty much pay.

Since this type of account was introduced I’ve always said it makes sense for us to all have one of these current accounts. Though they aren’t as good as they used to be.

There used to be four separate banks accounts from three banks – Natwest, RBS and Santander – all offering varying rates of money back on your regular bills.

But after Natwest and RBS dropped this reward in February 2020, it’s now down to just two – both from Santander. There’s the full 123 account, and the more limited Santander 123 Lite.

So which is better? And are they even worth it after a raft of changes reduced what you get?

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Santander 123 cashback current accounts compared

First a look at what these two accounts offer.

Santander 123

Monthly Fee£4
Interest %1.75% on balances up to £20,000
Cashback (capped at £5 per tier each month)1% on Council Tax, phone, mobile, TV and broadband bills and Santander mortgage repayments
2% on gas and electricity
3% on water bills 
RequirementsPay in £500 a month
Pay out at least two Direct Debits

Santander 123 Lite

Monthly Fee£2
Interest %None
Cashback (capped at £5 per tier each month)1% on Council Tax, phone, mobile, TV and broadband bills and Santander mortgage repayments
2% on gas and electricity
3% on water bills 
RequirementsPay in £500 a month
Pay out at least two Direct Debits
Sign in to your online or app banking every three months
Go paperless

You’ll also get access to limited cashback offers with selected retailers when you use your debit card. These frequently change

What are the main differences between the 123 and 123 Lite accounts?

You earn the same rates of cashback with both the full 123 account and the 123 Lite account.

The big difference between the two is that you don’t get any interest on the balance in your account with the 123 Lite account. However, that’s reflected in a lower fee – £2 a month rather than £4.

There are also a few extra hoops you have to jump through for the 123 Lite. You’ll need to log into internet banking at least once every three months, and you need to choose paperless statements.

Santander 123 cashback: How much can you make?

The amount you earn all depends on the size of bills. If you’re a high bill payer, you’ll get more. But if you’ve been savvy and shopped around to get the best deal, you’ll earn less. 

Changes in October 2020 could also have hit how much you’ve been making, with water bills moved from 1% to 3%, and broadband and mobile phone bills moved the other way. Most people will have lower water bills than telecoms.

There’s also a £5 cap per category, so the most you can possibly make each month is £15 – though for most that’s unlikely.

The biggest earners though are those with a Santander mortgage as there’s 1% back (up to a limit of £5 a month – and this cap includes your return on Council Tax, energy and telecoms).

In September and October 2022, the cashback rate on energy bills will double to 4% (as will the cap to £10 for that category).

Santander 123 cashback calculator

On the Santander website there’s a calculator you can use to work out how much you’re likely to earn with each account on the Santander website. Scroll down the respective pages and expand the section called “Interest and Cashback” or “Cashback”. The calculator will then appear.

For Council Tax the cashback is calculated as if you pay it over 10 months rather than 12. Though the former is the default way I’ve always preferred the consistency of every month. If you pay by 12 months then you’ll need to multiply the amount you pay by 12, then divide by 10, and put that figure in the calculator.

Don’t forget to factor in the monthly fee, which will show in the calculator. With the 123 Lite, you’ll need to take away £24 each year, and with the full 123 account, it’s £48 a year.

What I’d make in cashback

If you’re a regular reader you won’t be surprised to know I’ve got as good a deal as possible on all my bills. I switch energy provider frequently (well, I did when this was possible) and ditched pay TV years ago. Plus I’ve haggled low prices on broadband and mobile phones.

Our water is on a meter and my Council Tax is quite high, but there’s not a huge amount we can do to reduce these further.

BillMonthly costCashback rateMonthly cashback
Council Tax£2121%£2.12
Mobile Phones (x2)£161%£0.16
Gas & Electricity£2102%£4.20

Assuming I had the 123 Lite account and not the full 123 account, I’d earn £5.99 a month after the fee, which is £71.88 a year.

If your bills are higher, or you have pay TV, then you’d earn even more.

What to watch out for

Though the categories of cashback are quite broad and cover lots of bills, not every supplier will be included. For example Giffgaff doesn’t appear in the eligible supplier search form. Do check how your supplier appears on your bank statement. For example M&S Energy doesn’t appear on the list, but Octopus Energy, which is how you’re billed, does.

Also, if you split bills with a partner or housemate then you won’t get the full benefit of this type of account. You could open up a joint account for these key bills, though there are risks you need to be aware of.

Don’t forget there’s that £5 cap on each category too. So for example if your energy Direct Debit is more than £250 a month you’ll only get the fiver.

Santander 123 interest rates

Only the full Santander 123 account pays interest on savings. This increased to 1.75% on 8 November 2022.

There’s also a cap of how much of your account balance you’ll earn money on, set at £20,000.

In fact, the £4 fee (£48) will completely wipe out the interest earned unless you have more than £3,200 saved. The table below shows a few examples of what you’d get with the Santander 123 account after a £48 deduction versus the current top-paying easy-access account at 2.81%.

Amount savedInterest earned in Santander 123 after fee Interest earned in 2.81% paying account

You lose out every time! Of course, being far you need to account for the cashback on bills. So let’s assume that’s the same £2 as the 123 Lite charges. This means you’re effectively paying a £2 fee each month for the interest. Does that make it better?

Well, no. Even if you add £24 to the rates above, it’s still substantially less money earned by having the full 123 account.

Santander’s mobile app

The Santander app is middle of the road compared to other bank apps. It has most of the standard features you’d hope for such as setting up new payees in the app and amending standing orders. It also has some rarer ones, such as revealing you PIN. You can also use biometrics to log in, such as your face or fingerprint.

However, it doesn’t have any of the innovations in budgeting and saving that the likes of Monzo or Starling offer.

Santander switching bonus

Santander launched its first proper switching bonus in late 2021 offering £130, increasing to £160 when it returned in summer 2022. This is a decent deal and is open to existing customers.

The offer can come and go, and it might be beaten by other banks so do check my ultimate list of bank switching and reward offers.

Summary: Which is the best Santander 123 account for you?

Andy’s Analysis: 123 or 123 Lite?

The two factors to consider are the interest and the fee. However you can do better than this interest rate elsewhere with other current accounts or in savings accounts -without paying a £4 monthly fee,

I think it’s a no brainer to go for the 123 Lite out of these two accounts. Yes you’ll need to check the online account every three months but most people should be fine with that.

Should you get a Santander 123 Lite account?

Since most of us are going to be paying these bills, it’s well worth getting this.

Personally I’d set this up as a second account just to pay the bills. A standing order from your main account can transfer over the required cash each month, which will cover those bills.

Most of these bills are set amounts that won’t change without notice, so it requires little ongoing maintenance. Though obviously you’ll need to make sure you cover ones that can change each month – for example an increased mobile phone bill.

How new customers can open a 123 Lite account

You can make applications for the Santander 123 Lite account online, on the phone or in branch. Online is easiest.

Some banks require you to switch to get incentives, but to take advantage of cashback on your bills you don’t even need to close your existing account.

You can simply open up a new account (there’s no limit to the number of current accounts you can have – I’ve got 14!)

You will need to transfer over your Direct Debits, but you can opt for a “partial switch” when you apply. Here you choose which direct debits you want to move, and this leaves your old account open.

Of course, if you don’t fancy having an extra account you can go through the full switch which does this automatically.

If you don’t go via the switching service at all then you do have to manually move over all your direct debits. To do this you’ll need to contact each bill provider with the new details and make sure the old Direct Debits are cancelled.

How existing Santander 123 customers can downgrade to a 123 Lite account

You absolutely should downgrade your account as there’s really no benefit to the main 123 account. 

If you currently have a 123 account then it’s fine to downgrade your account to a 123 Lite. You can do this online in your account, or you can phone up the bank or go in branch to do this.

The fastest way to do this is via your online banking or app. It should take a few clicks. Just look for the “Upgrade account” option (yes upgrade, even if you are downgrading!). Or you can go via this form from the Santander website.

If you are struggling to do this due to the lockdown then one solution (suggested by reader Mike) is to open up a new 123 Lite account (or any other account) and then switch the existing 123 account into this. That’ll take around 10 days and will mean you don’t have to wait for things to get back to normal.

If you want to get the best rate on your savings, then read this regularly updated guide.

Changes to Santander 123 accounts

It’s a long time since you earned 3% interest and paid just £2 a month! Here are some of the recent changes.

2022 changes

  • From 8 November the interest rate is 1.75%.
  • From 3 October the interest rate is 1.5%.
  • From 20 June the interest rate on the 123 account moved from 0.5% to 0.75%.
  • From 28 March 2022 the interest rate was increased from 0.3% to 0.5%.

2021 changes

The big change in April 2021 was cutting the interest rate on the 123 account in half from 0.6% to 0.3%. Along with this, the monthly fee on the full account was lowered from £5 to £4.

October 2020 changes

This was the third change in 2020. The biggest was the monthly fee on the 123 Lite will double to £2 a month, so £24 a year, meaning you’ll earn £12 less a year.

Both accounts also saw a change in cashback rates on some bills. Water bills now earnt 3% rather than 1%, but phone, mobile, TV and broadband bills dropped from 3% to 1%.

Obviously, most people spend more on the latter than water, so they likely saw a decrease in total cashback earned.

Earlier changes in 2020

A new £5 cap was introduced to each part of the cashback. So a maximum of £5 every month on the bills earning 1%, another £5 on those earning 2% and a final £5 on the bills making 3%.

For most people this didn’t make much difference as you’d need quite high bills to exceed the section caps.

However, if you had a Santander mortgage then you most likely lost out in the new system.

The other big change was that interest on the main 123 account dropped from 1.5% to 1% in May, and down further to 0.6% from August 2020.

33 thoughts on “Santander 123 vs Santander 123 Lite review: Cashback current accounts compared

  1. The interest rate has just gone up to 1% on the full 123 account

  2. Hi Andy,

    Great article!

    If I downgrade to a Lite account, what are the consequences of not logging in every 3 months? Does the app count as a login is is it just the Web? Will they warn me if I have not logged in after say 2 months?

    Thanks in advance.

  3. Hi Andy – thanks it so great to have an easy comparison – I also switched from the 123 to the Lite after changing Mortgage providers. In fact I circulate through three banks each month getting the benefits – Barclays have a great online app with a header feature that lets you see at a glance forthcoming payments (extremely useful tool with planning – no more scrolling through the statements) and various insurance packs; then to Club Lloyds which gives you a lifestyle reward (choose one from
    6 x cinema tickets at ODEON or Vue cinemas
    1 x annual digital Gourmet Society membership
    An annual magazine subscription
    12 x digital movie rentals), tiered interest and cashback options; then to the Santander Lite with its cashback benefits. This took a bit of setting up with the various conditions but now works like a dream!!!

    1. Fantastic. Take a look a Halifax Reward too, £5 or a cinema ticket every month

      1. Not a fan of this current account as you have to use it to spend £500 a month just to her this bonus. I’d rather use my Am ex card

  4. I had a Santander account and switched to nationwide to get the £125 bonus. Can I now swap back to Santander to get the £140 bonus?

    1. Potentially. You’ll need to apply for a new account with Santander, but as long as they give you the account and you’ve not had the switching bonus from them before, you will qualify

  5. Hi. Re the £500 pay in eligibility – Can I just transfer £500 via direct debit into the Lite account, and then transfer it out again via direct debit straight away? If so, what is the least amount of time the £500 needs to be in the account – can I literally set up a direct debit pay in of £500 on the … 5th of each month lets say, and then have another direct debit removing it from the account on the 6th? Thanks.

    1. Yes, though you’ll also need money to cover the bills and the monthly fee!

  6. So even if you have the full £20k and cashback from bills, it seems that it’s still worth it to downgrade to the 123 Lite?

    1. I think so, and putting your savings in a free savings account. Even if it offers the same as the 123 you’re still better off.

  7. Never saw this coming! I have a two-year fixed-rate ISA linked to my 123 account,

    which now pays what turns out to be a fantastic rate of interest.

    How would that be affected by a downgrade to 123 Lite?

    No point phoning for help, as there isn’t any!

    1. Hi Barrie, it shouldn’t make a difference unless that initial fixed-rate ISA was explicitly for the main 123 and the Lite.

  8. If I switch from 123 to lite, and continue to pay in £500 per month and continue with my two direct debits, and keep enough in the account to meet my monthly outgoings, can I move all the rest to a savings account of my choice. And there is no stipulation for me to keep £20k in the account.

    1. Yes you only need to have money in the account to pay the bills – anything else can be moved for a better rate!

  9. For me it won’t be worth having either of the 1 2 3 accounts so I am thinking of changing to a Santander ordinary current account. Hopefully I can keep all my direct debits and so on in the new account but I am not sure. Does anyone know?

    1. Yes, they should be able to convert you to a standard account, or you might have to open up a new one and then you can then switch everything over from your 123

  10. Does using the Santander App qualify as using online banking for lite account every 3months?

    1. Yep, you can use the app or log in online

  11. Alistair Edmondston July 14, 2020 at 10:36 pm

    If I move to 123 lite can I still use my existing 123 credit card which gives Cashback at Supermarkets etc.?

    1. Hi Alistair. Yes I’d expect so but it’s worth checking with Santander. However, if I’m right there’s a £3 monthly fee on the card, and the caps mean you can get a max of £9 across the three categories – and that’s if you are spending £150 a month at department stores. Let’s assume you are getting all that – so spending £550 to get £6. You’d probably be better off using an Amex Platinum Credit card. Spend £550 and you’ll get £5.50, but you’re not capped, and will earn on other categories too.

  12. If I change from the 123 to the lite account will I still be able to use my debit card for atm euro withdrawals in Spain and pay no interest or charges and get bank rate as I do now

    1. Hi Helen, yes Santander offer this for Spain on all adult bank accounts.

  13. “If you currently have a 123 account then it’s fine to downgrade your account to a 123 Lite. You will need to phone up the bank or go in branch to do this.”

    No need to phone the bank or go in branch at all. You can downgrade online. I did it almost a week ago.

    On the Santander website go to “Apply for a 123 Lite Current Account” and it will give you 2 options – 1 to “Start new application” and 2 to “Transfer a Santander account”. Select that second option and enter a few details on the form – it’s really quick to do!

    Alternatively, if you’re logged in to your online banking, then select the option on the right to “Upgrade current account”, then select “Find out more” under the 123 Lite details, then select “Upgrade” (I know technically it’s a downgrade, but that’s what they call it!) and it will take you to the same form as the above other method does. Just enter a few details and done.

    Account switches from 123 to 123 Lite and all your other details (account number, card and pin) stay the same 🙂

    1. Thanks Gill. Really useful

      1. I agree with Gill. Just transferred to Lite automatically and saving £4 a month!

    2. may be stupid question but do you get the £130 or £160 (not sure at time of writing) to switch from 123 to 123 lite, as advertised august 2022

  14. I think Santander is still one of the best options when choosing a current account, especially the Lite account.

    If you’re a 123 customer, downgrading is easy. I applied yesterday and I was switched earlier today so it was very quick. All the bank details and card stay the same.

    I have been with Santander since 2016 (123 account). I was going to switch to another bank when they announced the cut in interests but I decided to just downgrade to the 123 Lite instead. I’m not going to get the interests BUT I’ll move my money into a saving account at a same rate or slightly better. This way I’ll get the same interests as the 123 account but without paying the 5 pound fee. And keep receiving the cashback from bills.

    1. That sounds like a great plan Sush

      1. That’s exactly what I intend to do.

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