Santander has announced that from May 5, 2020, interest paid on their flagship 123 account with balances up to £20,000 will be cut to one percent. It has also become the latest bank to set a 39.9 percent overdraft rate.
Between March 2012 and November 2016, customers with up to £20,000 in their 123 account earned three percent a year. This has now dropped to 1.5 percent and customers will now earn up to £199 in interest per year.
The changes come as a response to the persistently low interest rate environment and tough new regulations designed to protect consumers.
Santander is the latest to announce such changes in response to the new regulations, with Nationwide, HSBC and RBS all recently setting their overdraft rates just above 39 percent. Barclays have set its rate to 35 percent.
Also the £10 fee for bouncing a payment goes as does the fee for paying an overdrawn payment. Some accounts are different with lower interest charges. It is still as complicated as they can make it but cheaper for most. All done to follow rules imposed by FCA.— Paul Lewis (@paullewismoney) January 14, 2020
The Financial Conduct Authority’s (FCA’s) regulations are designed to prevent higher prices being charged for unarranged overdrafts than for arranged ones. The majority of customers would better of under the new rates, but some with arranged overdrafts may be worse off.
Susan Allen, head of retail banking at Santander, said: “While we have had to make some difficult decisions in the current environment, our current account range remains very competitive.”
“Our goal is to ensure these accounts remain sustainable for the future.”