Interest rates are dwindling fast
Banks and building societies are continuing to slash the interest rates on their current and savings accounts.
Santander is to cut the interest rate on its popular 123 current account from 1% to 0.6% from 3 August. The rate had been 1.5% until last week. In three months customers holding the full balance (£20,000) “will have gone from earning up to £302 a year in interest to £120, but the bank will continue to charge... £5 a month”, says George Nixon for ThisisMoney.
What’s more, this month Nationwide cut the rate on its FlexDirect account from 5% to 2% on balances up to £1,500. The 2% rate is still the highest on a current account. But you only get it if you pay in £1,000 a month and it drops to 0.25% after a year.
The upshot? Stop trying to save and spend from the same account, says Adam Williams in The Daily Telegraph. “The top easy-access savings accounts from Investec, Marcus and RCI Bank pay 1.2%... with no monthly fee.”
If you want cashback on your bills, Santander’s 123 Lite account offers the same cashback rates as its standard one but with a lower £1 fee and no interest. You can earn up to 3% cashback, capped at £15 a month. “Taking that fee into account the most an account holder can earn is £168 a year,” says Katherine Denham in The Times.