Santander’s 123 account – keep it or not?

UPDATE In 2016 Santander have made major cuts to the interest rate and cash back benefits for their 123 current account, cutting its main interest rate from 3% to 1.5%.

When I originally write the article below in 2013, it was one of the best deals on the market! But is it still? There are now four million people with one of these accounts…

Martin Lewis has looked at this in detail and unfortunately there isn’t a simple answer – it depends on how large a balance you keep in the account and how much cash back you get.

Switching is now easier

Banks have introduced a new Switch service which aims to make it easier, faster and less error-prone to switch current accounts. The main advantages of this are that:logo for new account switiching service

  • all banks operate an identical service
  • it will complete in 7 days
  • your new bank sorts out all problems, so you have a single point of contact
  • for 13 months after the switch any payments or debits that would have gone to your old account will be sent on to your new account
  • you are guaranteed to be refunded any interest or charges that happen if something goes wrong.

So if you have been putting off switching by the thought of the endless hassle and problems, this might be a good time to look at the range of current accounts around and see if one would be a big improvement on your existing current account.

Santander’s 123 account

1 2 3 account logoIf like me you are struggling to find easy access savings accounts that pay more than a pathetic rate of interest, you should take a look at Santander’s  123 current account and consider keeping a very large balance in there:


  • pays 3% interest on balances between £3,000 and £20,000
  • gives cashback on household utility bills – 1% on council tax and water rates; 2% on electricity and gas bills; 3% on mobile, phone, broadband and TV bills.

There is a calculator here that let’s you see how much money you will make from the interest and the cashback. Of course, tax will have to be paid on the interest, but the cashback is not taxable.


  • you have to pay in £500 a month and set up at least 2 direct debits, so you can’t use it as a pure savings account
  • there is a monthly charge of £2 a month. This is easily outweighed by the interest if your balance is over £3,000, even for a higher-rate tax payer.
  • it’s Santander, the bank with the worst reputation for customer service in Britain. To be fair, this seems to have been improving a lot over the last year, but it’s hard to forget.
  • the overdraft charges are huge. This is not a good choice unless you are sure that you will always be able to leave a large balance in there.

So am I going to switch current accounts? Well no, as a CAB advisor it’s really hard for me to ignore Santander’s poor customer service reputation. But I have decided to put my toe in the water and open a 123 account. I am going to treat this as a savings account except I will use it to pay my council tax and utility bills. If I like the account and the customer service, then I will move over fully later.


  1. premierfellas says:

    I’ve had the 123 account for much of the year, and have been using it as a secondary savings account with only the DDs that earn cashback transferred to it (although I have also transferred the monthly savings standing orders that go to other savings institutions as well, knowing that those are easily switched elsewhere should issues arise). The poor customer service history (not just anecdotal – I’ve suffered it myself in the past).

    The only issue I have had is on almost every occasion that I have sent a first-time one-off faster payment, it has bounced back, completing only when Santander resent it the following day. I suspect this is some sort of security thing that is being triggered, but on each occasion that it happened I input the correct OTA code sent to my phone (payments were sent to different payee banks, so I’m 99% certain that Santander is the issue, not the receiving bank).

    Whilst this continues they have zero chance of me fully transferring my main current account as I have no confidence in their Faster Payment system, but the account works fine as a good secondary cashback savings account (with a monthly reminder in my calendar to meet the funding requirement).

    • very interesting – you are the second person I have heard comment that the ‘security’ is a nuisance. It sounds as though I too may be keeping it as a secondary account.


      • Alan Kilham says:

        I agree – their security is a REAL nuisance. Over zealous and a ‘pain in the bottom’ to resolve.

        • Gethin Bermingham says:

          I went to Morocco after making arrangements to use my 123 MasterCard. When I came to use it, I found it was blocked. I rang the help line. Each call produced a different reason for the block. No help was offered. I was told I would not be able to unblock it until I got home. I had no other card with me. I could not pay my hotel bill.
          I am just now closing my 123 account down.

  2. I have had this account since May as a joint account with my parter for our household bills and general joint costs. The main gain really is that it pays 1% cashback on our mortgage payment – which is £680pm, so £6.80, far outweighing the £2pm fee.

    We have netted about £18pm since opening it – cashback and net interest (we will need to pay some extra tax on this as OH is a higher rate tax payer, though I am not, so we’ll have to pay an extra 20% on his half). We tend to have over £3k in there for about half the month but I don’t like seeing a big [available] balance, so, despite the interest it suits me better to move this out of view to a ‘savings’ [almost no interest, grrr] account.

    The customer service aspect – they have got better I think and are very open to feedback now. On the phone they are mainly very good and you get calls and follow up letters if you raise any issues. The email questions never get a sensible answer so I would avoid bothering with those. Which is a shame as, of course, sending an email (secure message) is free.

    As for security – setting it up was a nightmare, but in fact, once it’s done, it’s fine. I couldn’t log in from any random device though as I could never remember my long number (see, I can’t even remember what they call that!) but it’s fine on the PC at home and they do have telephone banking too.

    As for faster payments, I’ve not had any problem at all with these. I send one each week to our veg box chap and there’s at least one thing a week, sometimes more often, I have to pay myself back for (I have the S’der 123 credit card so I use that for our grocery purchases which attracts 1% cashback then transfer the money back to myself from the joint current account where the budgeted funds sit – I know it sounds onerous but I think t’s worth it in these days where we get so little interest on anything). I’ve never had any payment bounce or not complete.

    • Bouleversee says:

      Have you tried transferring amounts of £1k or more, even to accounts in your own name which are in your payments address book, i.e. done before? I have problems every time, same with cahoot (I think they use the same system). Their fraudchecking system is primitive compared to other banks.

  3. I also have one (and the 123 credit card) and couldn’t speak more highly of it. I’ve never had to use the customer service so can’t really comment on that aspect though.

    I use the account as my normal current account but also keep a lot of savings in there as well, and it works out well. Never had a problem with cashback, interest or payments not going through.

    With the current account cashback and interest and the credit card cashback I come out far better every month with Santander than I would with any other option in the UK market, except maybe the Lloyds Vantage accounts, which also pay 3% (but not to £20000!)

  4. Mick Marshall says:

    Santander seem to have a problem with processing payments. Last year I attempted to top up my cash ISA at Santander and they rejected my payment! After a second failed attempt, I moved the whole ISA to a competitor.

  5. Helpful information as I was just about going to use them.

    Just wondered if the details of your main bank account are given , can you specify which standing orders
    are to be transferred to the new account .

    • J Illingworth says:

      Just doing this myself. I have had an account since it was Giro bank (long time ago) then Alliance and Leicester and so on. Just changing to the 123 current account and yes you pick the standing orders you want on the account not the bank. I have been doing transfers etc with the old account for many years with no problems what so ever. I can only speak as I find but things have always been ok for me. My big mistake was not making it a 123 account sooner for the benefits it offers. I would say to you don’t be put off by other peoples comments look for yourself at the benefits to you because everybody’s needs are different.
      If you think Santander is hard you should try Natwest !!

  6. Delboy says:

    Set mine up last month after being with Nat west for 50 years, and getting no interest whatsoever,
    Brilliant seamless change, only fly in the ointment was when Nat west realised I was leaving, and decided I suddenly had joint account, soon sorted with an Apology. Customer service fine, Just make sure you fill in all your details correctly, web and app all work as I would expect . Security issues , better there than not.
    Go for it , you really will be laughing all the way to the bank

  7. You’d be much better off having a no fee bank account and use a cashback site such as quidco instead, where cashback amounts are typically higher anyway.

    Satans have tried to hard sell this account to me on a few occasions, even when I have a much better product, the zero account with them. When I mention potential misselling and contacting Ms Botin (which I have) they quickly back off!

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