Millions of people with Santander’s popular checking account face a cut in interest paid amid changes for savers and borrowers.
The bank has announced that, as of May 5, interest paid on balances of up to £ 20,000 in your 123 account will be reduced from 1.5% to 1%.
The move has led a commentator to describe the bill as a “dead duck” for savers.
Santander has joined other major brands to establish an overdraft rate of 39.9%.
This will take effect on April 6 and responds to the new and strict rules of regulators designed to protect consumers.
How will savers be affected?
Between March 2012 and November 2016, those with up to £ 20,000 in their 123 account earned 3% in savings interest per year. This, along with some significant marketing, led a large number of customers to register for the account.
The rate then fell to 1.5% and, as of May, will fall to 1%. Cash back benefits on household utility bills will also be less generous.
Susan Allen, director of retail banking at Santander, said: “While we have had to make some difficult decisions in today’s environment, our current account range remains very competitive.”
However, Martin Lewis, founder of Moneysavingexpert, described the account as a “dead duck” for savers.
“There is little reason for someone to adhere to it. In May it reduces interest to 1%, which is substantially less interest than the easy access savings that pay more. The irony is that until this announcement, Santander 123 was prepared to a return [as the rate] It looked good again, “he said.
What is happening with the cost of an overdraft?
The Financial Conduct Authority, the City’s controlling body, is planning to shake the “dysfunctional” overdraft market, preventing banks and construction companies from charging higher prices for undrawn overdrafts than for fixed overdrafts.
The new rules, which will take effect in April, require suppliers to charge a simple annual interest rate on all overdrafts and get rid of fixed rates.
The result has been grouping between banks and construction companies, and most establish a rate close to 40%.
That would mean that someone who borrowed £ 100 as an overdraft for a whole year would pay £ 40 to the bank for the service.
Nationally, HSBC and RBS have set their rate at just over 39%, with Barclays setting their rate at 35%.
Most clients, mainly those with an overdraft not agreed, would be better off with these rates, but some who had organized their overdraft service would be worse.
“We have a range of support services, from our telephone experts to our branch offices, and we would encourage any customer who would like help understanding the impact of these changes, or any other aspect of managing their money to get in contact, “Allen said.