Is it time to ditch Santander 123?

This week Santander announced some big changes to their popular 123 current account and credit card. Is it worth staying or should you switch?

I’m a big fan of the Santander 123 account and card. I’ve had them both for nearly two years and made a decent amount of extra money in cashback and interest – money I would have had otherwise.

However from January 2016 there are going to be a few changes which don’t make it so attractive.

Changes to Santander 123 Current account

• The monthly fee will rise from £2 to £5 from 11th January 2016 – an extra £36 a year.

Though you can still get the same levels of cashback and interest each month, you’ll need to work out if this increase makes a difference.

I’ve got four TSB accounts (two are mine, two are joint) which offer 5% interest on balances up to £2,000. I also save in to a First Direct 6% regular saver.

I’d obviously fill them up first, meaning I’m unlikely to have enough money in my Santander to get the 3% interest. If anything I’d be better off opening a Nationwide, Lloyds or Tesco account instead which have better rates for low balances.

However, if you do have a decent chunk of money up to £20,000 – and don’t fancy having lots of different accounts like I do – Santander will still get you a decent return.

As for the cashback on bills, I never make a fiver each month as it is, so these changes could see me losing money each month.

Factor in a hefty £100 to £150 switching bonus elsewhere, it looks like it’s sayonara to the Santander current account for me.

The top bank account deals right now (updated 19/12/15):

• £100 to move to First Direct, then access to their 6% Regular Saver
• £100 to move to Halifax plus £5 per month interest
• £78.75 cashback via TopCashback to move to Nationwide, then 5% interest on balances up to £2,500 
• 3% cashback on household bills with Natwest or RBS’s Reward Account

Other conditions apply so do read all the terms and conditions! There are other bank accounts with great interest but you don’t need to switch to them for the bonuses.

Changes to Santander 123 credit card

Existing customers:

• The annual fee will rise to £36 from £24. It will so be charged monthly
• Since the fee is charged annually, existing customers won’t pay the new price until their first renewal after 11th Jan 2016
• You’ll be able to spend transaction free overseas from 11th Jan 2016 until 31st December 2016

New customers:

• The new higher fee come into place now for new applicants. It’s also charged monthly rather than annually
• Cashback earned per category will be capped at £3 for new customers, meaning you can make a maximum of £9 a month (or £108 a year)

It’s a different story for me here. Since I got my card in November 2013, I won’t pay the increased fee until November 2016.

However since the cashback is limited to only supermarkets (1%), department stores 2%) and transport (3%), you don’t get the money on every purchase, unlike other cards.

I make a decent amount of cashback on petrol and train tickets so I’ll keep the card for now, but I’ll rethink it if the cap comes in.

The 0% foreign transaction fee is good if you don’t already have a card that already does that (like the Halifax Clarity credit card). Watch out though as that offer isn’t permanent.

If you’re a new applicant I’d suggest going for an American Express Platinum cashback card instead.

You can get 5% on purchases in the first three months, then down to 1.25% after that. As long as the shop takes Amex (not always the case) you’ll make a decent return.