Business

Santander to raise fee on popular 123 current account

Santander Image copyright PA

Santander - the biggest gainer last year of customers switching current accounts - is set to increase charges on one of its most popular accounts.

From 11 January, it will charge £5 a month, instead of £2 a month, for its 123 current account.

So, 3.6 million customers will face an annual charge of £60, rather than £24.

The announcement comes just a few weeks ahead of the initial findings from the competition authorities on retail banking in the UK.

It is expected to give a detailed account of why relatively few people switch their current account provider.

'Venus fly trap'

Santander had an estimated net gain of 12% of current account customers in 2014, primarily as a result of the 123 account, figures from researchers TNS suggest.

This was the highest proportion of any major bank, ahead of Halifax (a 6% net gain) and Nationwide Building Society (a 4% net gain).

The bank said it had attracted 502,200 customers from other institutions since the Current Account Switching Service began in September 2013.

Hannah Maundrell, editor of money.co.uk, said: "It seems this venus fly trap was a great catalyst for the current account switching market but, now they have got people on board, [the 123 account] is becoming less of an attractive deal from January.

"Despite the account offering 3% interest on balances from £3,000 to £20,000 and cashback on some direct debit payments, the number of people who remain in pocket will be reduced significantly."

The bank it also making changes to its 123 credit card, meaning less cashback for some of the 1.8 million customers with this card as well as an annual fee increase from £24 to £36.

The accounts were launched three years ago, but now the charges needed to change owing to "external factors", the bank said.

Reza Attar-Zadeh, head of retail products at Santander, said: "Since launch we have not made any changes to the fee or cashback levels on these products.

"However, external market factors mean we have had to make some changes to ensure the products continue to meet the needs of our customers, but also our shareholders. We are writing to all our existing 123 customers and making sure we help them understand the changes and the options available to them."

Retail banking in the UK is the subject of a review by the competition authorities. The provisional findings are expected to be published in October.

There are 65 million active personal current accounts in the UK.

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