Is Santander's new 123 Lite current account any good?

Santander has launched a cheaper version of its standard 123 Current Account.

The new 123 Lite offering has a £1 monthly fee and you get the same cashback and preferential rates as its sister account, but none of the credit interest perks.

You'll still bag 1% cashback on water and Council Tax bills, 2% on gas and electricity bills and 3% on mobile, broadband and landline bills. Customers with a Santander mortgage or home insurance can also earn cashback on payments.

To reap these benefits you'll need to put in a minimum of £500 a month, set up at least two active Direct Debits and log onto your online or mobile banking account once every three months.

Disappointing numbers

The latest current account switching figures from BACS show Santander gained 41,772 customers between October and December 2015, but lost a whopping 38,180 over the same period.

The huge loss of customers is thought to be down to Santander's controversial 123 Current Account fee hike from £2 a month to £5 (or £24 to £60 a year) in January 2016.

However, it's still a winner if we're looking at the past two years as a whole, gaining almost 400,000 more customers than it lost, which is significantly more than its rivals.

Barclays, Bank of Scotland, Co-operative Bank, HSBC, Lloyds Bank, NatWest and RBS all made net losses in Q4 2015.

Is 123 Lite right for you?

If you have lots of Direct Debits going out of your account each month, but not a lot in the way of savings the 123 Lite account makes sense.

The standard Santander 123 Current Account pays up to 3% cashback on certain Direct Debits and up to 3% credit interest on balances. You can get 1% on balances from £1,000, 3% on balances from £2,000 and 3% on balances from £3,000 up to £20,000.

However, this account is less viable now for those with balances under £3,000 as the interest is cancelled out by the £60 fee.

This is where the 123 Lite account can step in. Just make sure that your bills will be able to generate over £12 a year in cashback to ensure the account is earning more than you pay to have it.

Other banks offer cashback too

Other banks offer cashback on household bills and everyday spending.

NatWest's Reward Account, Reward Platinum Account and Reward Silver Account also give you 3% cashback on your household bills if you pay them by direct debit.

The TSB Classic Plus Account rewards you with 5% cashback on contactless and Apple Pay on the first £100 a month you spend.