Best current accounts for in-credit interest: Santander raises rate to 2% for 123 customers

Santander raises interest on its popular 123 checking account.

From today, customers with cash on the current account will see their interest rate rise from 1.75 per cent to 2 per cent on balances up to £20,000.

This is the sixth time since the beginning of last year that Santander has increased the rate.

From February 7, the new interest will automatically apply to customer accounts. Someone who has the maximum £20,000 in the account can receive up to £396.38 in interest each year.

The 2 percent rate is also paid to customers with a Select and Private current account.

>> Check out our guide to the best bank accounts available

The rate hike will be welcomed by Santander’s customers, especially given that rates fell to just 0.3 percent in April 2021.

However, the more astute among them may wonder why the bank hasn’t reinstated the 3 percent credit rate it paid seven years ago given the recent rapid rises in base rates.

Since December 2021, the Bank of England has raised the base rate from 0.1 percent to 4 percent.

This has prompted some banks to raise their savings rates, as high interest rates make borrowing more expensive and encourage people to save. The best easily accessible savings accounts now pay 3 percent or more.

In 2016, when Santander last offered a 3 percent credit rate, the base rate was 0.5 percent.

But compared to other in-credit rates currently offered by other banks, it could be argued that Santander is one of the better options.

Many banks, including TSB, First Direct, Halifax, HSBC, Barclays, NatWest, Starling, and Monzo, do not offer in-credit interest.

Which banks offer the most credit interest?

However, those looking for a current account that pays interest on the money they hold can still do better than Santander.

For example, digital challenger bank Kroo has raised current account interest rates to 3.03 per cent on balances up to £85,000.

Someone who maintains a balance of £20,000 in their Kroo checking account could earn £606 over the course of a year, if interest rates remain the same. That’s £200 more than using one of Santander’s interest-paying accounts.

For those who don’t have large amounts of cash in their checking account, Nationwide may be a better option to switch to.

That’s because it offers 5 per cent interest to new members in the first year, on balances up to £1,500.

Anyone considering a bank account based on earning interest should also consider exclusive savings deals associated with each bank account.

Chase, backed by JP Morgan, for example, is raising the interest rate on its popular linked savings account to 3 percent on Monday.

The rate increase is automatically passed on to all existing and new customers.

Savers can deposit up to £500,000 into the account with no charge from Chase to access their funds.

To take advantage of this, depositors must apply for a Chase bank account. This is easy to do, with no cost or hoops to jump through. However, it does require downloading the app and creating a secondary bank account.

A spokesman for the Savings Guru said: “I think savers will be disappointed that the increase is not greater given what has happened with base rates over the last 15 months and also what has come to the market in that time.

With Kroo paying 3.03 percent on their checking account and Chase going to 3 percent Monday on their linked savings account, plus 1 percent cash back on expenses and 5 percent on roundups, Santander’s account looks pretty unappealing by comparison. .

While it’s a shame they haven’t done more, they’ve been a lot fairer than their high street rivals, who still pay interest rates of around 0.5 per cent to depositors, despite the base falling by 3.9 per cent at the time. percent increased. .’