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One of the easiest ways to earn a little cash is to get a cashback current account for your bills. But do more changes make it 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 when more changes are introduced in the autumn?

Changes to Santander 123 accounts

October 2020 changes

For the third time this year, the Santander 123 accounts are to change. Now from October 27th 2020 there will be more cuts.

The biggest is 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 will also see a change in cashback rates on some bills. Water bills will now earn 3% rather than1%, but phone, mobile, TV and broadband bills will drop from 3% to 1%.

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

Earlier changes to Santander 123 in 2020

A new £5 cap was introduced to each part of the cashback. So there’s now 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 won’t make much difference as you’d need quite high bills to exceed the section caps.

However, if you have a Santander mortgage then you will likely find you’ll lose 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 it’ll go down further to 0.6% from August 2020.

Santander 123 cashback current accounts

First a look at what they both offer. These are the new rates and fees from late October 2020.

Santander 123 – what you get

Cost per month: £5

Cashback (each level is capped at £5 a month):

  • 1% on Council Tax, phone, mobile, TV and broadband bills and Santander mortgage repayments
  • 2% on gas and electricity
  • 3% on water bills 

Interest rate: 0.6% on balances up to £20,000 


  • Pay in at least £500 each month
  • Have at least two direct debits

Santander 123 Lite – what you get

Cost per month: £2 (£1 until October 2020)

Cashback (each level is capped at £5 a month):

  • 1% on Council Tax, phone, mobile, TV and broadband bills and Santander mortgage repayments
  • 2% on gas and electricity
  • 3% on water bills 

Interest rate: 0%


  • Pay in at least £500 each month
  • Log onto online or app banking every three months
  • Go paperless
  • Have at least two direct debits

How much can you make in cashback?

it 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. 

My Council Tax is quite high, but elsewhere I’ve got great deals on broadband and mobile phones, switched frequently for energy and ditched pay TV years ago.

The changes from October actually won’t affect the cashback I earn as I pay the same for broadband and mobiles as I do for water – but I think that’ll be rare for most people.

I was with Natwest before it closed the cashback offering on bills, but with Santander I’m likely to get £5 ish back before fees every month.

What will impact the return is the double fee on the 123 Lite. It’ll work out as £3 ish a month, or £36 a year. It’s money for nothing so to speak, but not the most exciting figure.

The biggest earners though are those with a Santander mortgage as there’s 1% back (up to a limit of £5 a month).

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.

> Try the Santander 123 Cashback Calculator

> Try the Santander 123 Lite Cashback Calculator

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

The big difference between the accounts 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 much lower monthly fee – down from £5 to £1.

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.

Which is the best Santander 123 account for you?

Previously the choice between the Natwest or RBS Reward account and the Santander options was down to your own circumstances.

Depending on what bills you had and how much they were the amount of cashback you’d get back would be different at each bank. For that reason I chose Natwest rather than Santander.

However now the choice on cashback is now much easier. The cashback you’ll earn on both the 123 and 123 Lite will be exactly the same. So it’s the other features which really matter.

Obviously the main difference is that 0.6% interest on savings. However you can do better than this interest rate elsewhere with other current accounts or in savings accounts. And none of those come with a £5 monthly fee,

In fact, the £5 fee will wipe out the interest on the first £8,325. Put that amount and anything above it in a different account earning 1.16% (the best easy access right now) instead and you’ll make an extra £37 a year.

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.

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.

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.

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.

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.

The best bank switching, cashback and interest offers (July 2020)

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