A slew of changes to current accounts means customers would be well advised to review their banking arrangements and see if they would be better off moving provider.
Santander has put up its monthly fee for its 123 account by 150%, with customers now forking out £60 a year for the privilege of holding one of these accounts – although it remains a good option for people with high balances.
Meanwhile, HSBC has cut the interest it pays on its current accounts. But on a more positive note, the Co-op has introduced a reward scheme that means customers can earn up to £5.50 a month on their accounts.
“The monthly fee on the Santander 123 current account will increase from £2 to £5, meaning the annual cost of this account will go up from £24 to £60, while HSBC has cut the interest paid on its current account from 1.29% to 1.09%,” says Kevin Mountford, of Moneysupermarket.
“These changes will eat into returns, so existing consumers need to be prepared to reassess their deals and check that it’s still the most profitable option for them.
“With the Santander account, people will continue to earn the same amount of interest and cashback on everyday spend as previously, so if you keep a high balance in the 123 account, you’ll still earn more in interest than you would from an easy-access savings account.
“Our calculations show that those with £4,500 or more sitting in their account will earn £135 in interest over the course of the year. Once the account fees are taken away, this still leaves £65 – the equivalent of 1.66% interest. However, anyone with a balance smaller than £4,500 should consider moving their money into the highest paying savings account to get more for their money.”
Matt Sanders, of Gocompare, says: “This is a substantial increase and as such customers who haven’t already should be seriously considering whether they’re getting enough back from the 123 current account to justify what they’re paying.
“Current accounts shouldn’t be considered as an off-the-shelf, one-size-fits-all product as everyone uses their account differently.
“While it’s easy to get lured by incentives, such as cashback or switching offers, it’s really important for consumers to look beyond these and instead consider how they actually use their account to decide where their money will be best placed.”
The move by the Co-op means that a reward of £4 a month is available for customers who pay in at least £800 a month, stay in credit (or within the limit of any agreed overdraft), receive paperless statements, have at least four direct debits paid out each month, and log into mobile banking at least once a month.
Up to a further £1.50 a month can be earned as cashback for using a debit card.
Charlotte Nelson, of Moneyfacts, says: “The Co-op’s new current-account reward scheme is a welcome addition to the market and a great way for new and existing customers to earn something extra from their everyday spending habits.
“It’s great that customers can not only benefit from the straightforward £4 per month cash reward but also receive an extra boost from their debit card transactions as well – increasing their reward potential to a maximum of £5.50 per month.”