Written by Karen Bryan
Update 22 May 2015 – The Santander 123 Current Account is still paying a rate of 3% on balances between £3,000 to £20,000). That makes me glad that I did open this account, especially as interest rates on savings account have dropped over the last couple of years. I also earned £45 cashback by opening my Santander 123 Current Account through the link on the TopCashBack.co.uk website.
I’m amazed that the Santander 123 Current Account is still paying 3% (variable) interest on balances of £3,000 to £20,000 when the Santander eSaver (Issue 11) account is paying a paltry 1.0% in interest. I’m starting to think that I may need to open a Santander 123 Current Account in order to access that 3% rate on instant access savings when the 12 month bonus on my Santander eSaver (Issue 5), currently paying 3.2%, expires in April.
I do have a Halifax Reward Saver paying 2.5% (variable) with a 12 month bonus which expires at the end of August. But if I make more than four withdrawals during the 12 month period, the rate of interest will fall. Therefore, I still need an unlimited access savings account for everyday use.
At present, the highest rate of interest I can find for instant access savings is 2.35% with BM Savings. However that’s ruled out as it requires a minimum deposit of £50,000. The next best rate is 2.1% (variable) with the Post Office.
I’m quite happy with my Halifax Reward Current Account which pays me a £5 monthly bonus, as long as I pay £1,000 into the account. That makes me loathe to change to the Santander 123 Account, which has a £2 a month fee. I can probably cover that fee by cashback earned on paying qualifying household bills by direct debit from the Santander current account.
I worked out that getting another 0.9% in interest by having £17,000 in the Santander 123 Current Account (you only get 3% on balances between £3,000 and £20,000), versus having the £17,000 in the Post Office account paying 2.1%, would give me another £170 (£136 after basic rate tax) in additional annual interest.
My concern is that once I go through the hassle of changing my current account, that Santander could reduce the variable 3% interest paid on savings.
It seems like such an effort to earn a bit of (not guaranteed) extra interest on your savings.
Interest rates correct on 25 January 2013.