The Fixer: current account switch

Santander is slashing the interest rate on my 123 account.

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Dear Fixer,

I opened a Santander 123 current account a couple of years ago to benefit from the 3% interest rate on my cash savings of about £10,000.

I now hear that the bank is cutting the rate from 3% to 1.5%. It's annoying, but this new rate still seems better than I can find elsewhere. Is it worth switching to another bank?

F Brown, London

Dear Mr Brown,


It is true that in the current low interest rate environment, 1.5% remains a reasonable rate of interest - especially as Santander allows you to withdraw your funds at any point.

However, the Santander account has a £5 monthly fee that will eat into your returns. It is therefore worth looking at other fee-free current accounts paying high interest.

These include Nationwide's FlexDirect account, which pays 5% on balances of up to £2,500 for the first year and 1% thereafter, and TSB's Classic Plus, which pays 5% on up to £2,000 and also offers 5% cashback on up to £100 of contactless card or Apple Pay spending every month.

You could then put the remainder of your savings into an easy-access savings account such as Virgin Money's Defined Access E-Saver paying 1.05% or Manchester Building Society's 45-day notice account, which pays 1.36% but only allows withdrawals with 45 days' notice.

Don't forget, however, that these rates are all variable and could fall too - especially if the Bank of England decides to cut interest rates again.

As the Santander rate will remain at 3% until November, it also makes sense to make the most of it by sticking with the bank for the next couple of months.

The Fixer

Whatever your financial problem, write to themoneyfixer@aim.com and The AOL Money Fixer will get on the case.

Bank of England Cuts Interest Rates to Record Low