Santander UK has increased the rate on its flagship 123 accounts, as competition between providers ramps up.
The annual in-credit interest rate on the 123, Select and Private current accounts has increased to 1.75% on balances up to £20,000, from 1.50%. The new rate of interest should have been automatically applied on Tuesday, meaning customers can now earn up to £347.22 in interest per year, in addition to any cashback they earn on selected household bills paid by direct debit.
The previous rate was 1.50% and it has already been increased several times this year. It had previously been whittled down several times, amid years of a low interest rate environment.
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Cashback on household bills through the 123 accounts is capped at £5 in each of three different cashback tiers. Customers can earn 1% cashback on council tax bills, mobile and home phone bills, broadband and paid-for TV packages, and Santander monthly mortgage payments.
They can receive 2% cashback on gas and electricity bills, Santander home insurance premiums and Santander life insurance premiums. They can also receive 3% cashback on water bills.
There is a monthly fee of £4 for the accounts and Santander said this will remain unchanged. Santander said the interest rate on its 123, Select, and Private current accounts is variable and does not track the Bank of England base rate.
The Bank of England hiked the base rate to 3% last week, marking the latest in a string of increases. Many savings providers have been improving their rates in recent months and some current account providers have also been upping their offers of cash to switch.
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