Santander 123 account fee increasing to £5 from January

Nick_C

m0bov wrote: »

Well, from my point of view I was surprised they have hiked the fees and by so much I get about 5 pounds from cash back on the current account and don't tend to keep much "spare" cash in it so its a no brainer to change. However I make about 8 pounds on the credit card each month, so is it worth keeping it?

I noticed the ISA with First Direct is better than Santander so my plan is to:
Switch Current AC and ISA AC to FD and keep the 123 Credit Card.

What do you think? FD pay 150 pounds which is worth far more than any cash back deals. I use my credit card at Morrisons and Shell and pay off in full each month.

Is the net interest on a FD ISA really higher than the net interest on a 123 current account???

Archi_Bald

Nick_C wrote: »

Is the net interest on a FD ISA really higher than the net interest on a 123 current account???

It isn't, but the Santander ISA probably pre-reqs a 123 account? Hard to see, though, why you would settle for a max 1.5% ISA at FD when you can get better at Nationwide.......if indeed it does make any sense at all to have an instant access cash ISA.

ratechaser

eskbanker wrote: »

Come back and let us know how you get on, some of us may be particularly interested in the answer!

Will gladly do so, although may not be till November time, when I have some maturing funds that will need a new home :-) At least the dd cashback from the accounts would more than cover the combined £20/month fee.

SeduLOUs

I'm not entirely sure what to do yet. Keeping the CC for now - my cashback for the last 6 months less the new £3 fee is still higher than what I would get on a 1.25% Amex.

When I first opened the 123 account I had little cash (in debt) so the interest didn't matter and I opened it for the cashback, which at the time was getting me around £15 per month.

Roll on 12 months, and I've scrapped Sky, moved to PAYG and generally blitzed the bills, so my cashback is only about £3 per month now, but my bank balance is averaging just shy of £6k so it's still been productive. Unfortunately, £1200 of that is earmarked to go into a H2B ISA in December, and another £2k is earmarked to clear a credit card (that is on 0% so no point rushing to pay it). As my balance is going to take quite a whack pretty soon I'm not sure where it leaves me - the account might actually start to cost me in the short term until I rebuild my savings.

I think I need to look a bit deeper at my actual plan to try and forecast where my balance is going to be, and then consider my options.

Zandoni

adindas wrote: »

A lot of people who open 123 account are people who get used to switching their account.

So yes your statement might be true for people who are ignorant, not to people who know how to do math correctly to access what they gain and what they loose and what other alternative available on the market.

There's a whole lot more who will not bother, the 123 account is far too good a deal to last too long.

SeduLOUs

adindas wrote: »

So yes your statement might be true for people who are ignorant, not to people who know how to do math correctly to access what they gain and what they loose and what other alternative available on the market.

I suspect that many will simply look at their total income in cashback/interest and compare that amount to the new £5 fee. If in the green, many will still see the account as 'good' and stick and not really consider the question of whether more could be made elsewhere.

The problem with this isn't just the maths - you're not just comparing interest rates less fees, there's variable cashback categorised into 3 different tiers coming from a current account and in many cases a credit card aswell.

I'm fairly savvy with numbers, but it took me about 30 minutes to gather the data I needed to do a proper comparison of interest plus cashback minus fees compared to what interest I could earn on an alternative current account, as well as a comparison of tiered cashback rates compared to a fixed rate of cashback I could get with an alternative credit card.

Even after doing that, I still don't really know whether to switch because I'm at around the £6k balance mark and my current account balance is going to fluctuate a lot in the next 12 months - I need to prepare a balance forecast in order to see where I'm better off (e.g. I'm considering Lloyd's but if my balance is going to sit between £3-4k for any period of time the interest plummets, so I might be better off where I am).

It's the ones with the lower amounts of money (and therefore interest) who need to do the most work to make an informed decision, and when we're only talking about a few quid per month I can completely understand why many simply can't be bothered (although in my view, if it takes me 2 hours to 'earn' £50 then I'm pretty happy with that)!

SeduLOUs

adindas wrote: »

You do not need to spend time to calculate yourself. Just look at your statement and add all of them, and then compare it with the fee of £5.

About the interest if you just have £6k and have not maximized other bank ACs which paying higher interest rate, such as TSB. Club Lloyds, why bother to stay at Santander. It is a simple decision no calculation is required as 4% or 5% is definitely higher than 3%.

Part one is what I did - gathered my statements to calculate my 'profit' after the fee. I then have to use this profit figure as my comparative figure against what the profit figure would be for an alternative account - so not quite as simple as just saying 4% is higher than 3%...

On that note, Lloyds. Yes, 4% is greater than 3%, but you need £4k in the account to get that. If I send £4k to Lloyds I'll drop to 2k in the Santander meaning I'll get 4% on £4k and 2% on £2k which isn't all that much better than 3% on the lot. Moving out more than £4k will leave my 'main' account too empty for my liking and day to day use, so I'd have to switch to max it, but that would mean losing my cashback, which would put quite a dent in the 'extra' interest (my calculations show I'm better off with Santander if I'm only keeping one account)...

TSB is worth considering, but then I remember that I have £1200 earmarked to go into a H2B ISA in December, and with shifting £2k to TSB would put me under the £3k Santander threshold again. I'd lose 1% at Santander to gain 2% at TSB - possibly still worth it but I need to dig deeper and then decide if the hassle of opening and managing another account is worth it for probably an extra few pence per month. Switching not an option as the max balance for interest is too low.

This is why I need to get a firm grasp on what my bank balance is going to be over the next 12 months or perhaps more before making a decision (and I suspect anyone with a similar amount of cash to me is in a similar boat) - it's really not quite as simple as just comparing AERs when there are thresholds attached to them.

SAHD_Jim

Nick_C wrote: »

On a separate point, I wonder how many people are getting unexpected cashback on the account? I used to have a gym membership with my local council which I paid by monthly DD. I got 1% cashback on this in addition to the 1% on my Council Tax. I expect Santander treat any DD to a local council as being for Council Tax. I wonder if any council tenants are getting cash beak on their rent?

Now I find this out! My wife signed my daughter up for Council run swimming lessons on a DD with our joint account, I could be getting 1% on it with my 123 account?!!

colsten

SeduLOUs, how about just going with 1 TSB and 2 Tesco accounts? That gives you space for £8K (£2K @5% and £6K at 3%), and at least 3% for every penny you have in your accounts. No DD cashback, but also no fees, and no headaches about balances in the accounts.

On top of this, TSB also pay you up to a fiver cashback a month for contactless payments until the end of 2016. And you can stick up to £250 a month into the TSB Monthly Saver which pays 5% AER, and which allows withdrawals.

SeduLOUs

colsten wrote: »

SeduLOUs, how about just going with 1 TSB and 2 Tesco accounts? That gives you space for £8K (£2K @5% and £6K at 3%), and at least 3% for every penny you have in your accounts. No DD cashback, but also no fees, and no headaches about balances in the accounts.

On top of this, TSB also pay you up to a fiver cashback a month for contactless payments until the end of 2016. And you can stick up to £250 a month into the TSB Monthly Saver which pays 5% AER, and which allows withdrawals.

It's food for thought. If I do anything it's likely to be a TSB because of the additional £5 a month to be made on contactless and the decent 12m regular saver.

I also have to consider keeping partner on board, as he already struggles with the priority list of which credit card (of 3) to use for which purchases to maximise cashback. Throwing a contactless debit card into the mix and trying to hit the £100 spend and then stop using it until next month will send him doolally!

I'll have a look at Tesco as I don't know much about it - it's our Supermarket of choice so I'm guessing there's probably Clubcard points to be had aswell. Thanks!