Santander launches new Edge Up account to replace 123 account

Santander announced today that it has removed 123 checking accounts from sale.

When launched in 2012, the 123 account became one of the most popular checking accounts, offering an interest rate of 3 per cent on balances up to £20,000 for many years and a variety of cashback on accounts.

Numerous reductions in this lending rate over the past six years caused its popularity to wane.

In addition to the 123 account, the Select and Private payment accounts are also being withdrawn from sale today.

Anyone who already has a 123, Select or Private current account with Santander can choose whether to keep their existing account or switch elsewhere.

Anyone who chooses to switch to a new Santander account will keep all of their existing information, including account number and sort code.

Instead, Santander is launching the Edge Up account, which offers customers the opportunity to earn over £100 a month in total with up to £30 cashback and up to £71.72 in interest.

The Edge Up account is essentially a souped-up version of Santander’s Edge account, which launched last November.

Most notably, new customers can earn 3.5 per cent interest on balances of up to £25,000.

This means that someone who keeps the maximum balance will earn £875 in interest over the course of a year – before taking into account the £5 per month (see below).

The new account also offers 1 per cent cashback capped at £15 per month on debit card spending in supermarkets and transport.

It offers a further 1 percent cashback, capped at £15 per month, for household bills.

This includes council tax, energy, mobile, fixed, broadband and paid TV packages.

Unlike some major banks, the debit card is free when used on board, including no Santander fees when using ATMs abroad.

Although it may be that the local ATM charges a fee, as Simon Lambert of This is Money recently discovered during a visit to France.

Andrea Melville, Santander’s director of personal current accounts and savings, said: ‘We know that many people are currently experiencing financial pressure from increased costs of the weekly grocery, high energy costs and other rising bills.

‘Our new Edge Up Current Account is all about making it easier for our customers to get the most out of their day-to-day expenses and help them stretch their finances a little further.

“We have a strong history of offering innovative accounts to our customers and we are pleased to continue this with our new Edge Up Current account.”

So should you sign up for the new Edge Up?

For all its benefits, there are some hoops and costs that potential customers should be aware of.

First and foremost, it comes with a monthly fee of £5 which increases to £60 every year.

Customers must also pay a minimum of £1,500 per month and set up two direct debits from the account.

While the cashback sounds generous, in reality the majority of customers are nowhere near the potential £30 a month.

To receive £30 monthly cashback, they must spend a minimum of £1,500 a month on eligible essential debit card expenses and a minimum of £1,500 a month on eligible monthly bills paid by direct debit.

It’s also questionable whether it’s worth keeping £25,000 in the account to maximize the interest possible, as there are better savings rates elsewhere.

The best easily accessible savings rate currently pays 4 per cent, courtesy of Coventry Building Society.

Someone putting £25,000 in that account could earn £1,000 in interest over the course of a year.

Someone willing to lose access to their money for a year can now earn up to 5.7 percent in a one-year, fixed-rate deal.

A total saving of £25,000 in the best one year fixed rate purchase deal will save you £1,425 over a year.