Last verified: 3 October 2026

Santander’s £5 monthly fee for its 1|2|3, Select and Private current accounts has already been in force since 11 May 2026, replacing the previous £4 charge. For a 1|2|3 customer, that means an annual account cost of £60.

The important question is no longer simply whether Santander has increased the fee. It is whether the cashback and interest actually earned are worth more than £60 a year, and whether keeping a large balance in the current account costs more in lost savings interest elsewhere.

How Much Does the Santander 1|2|3 Account Cost Now?

Santander increased the monthly fee on the 1|2|3, Select and Private current accounts from £4 to £5 on 11 May 2026. Fees collected from that date are £5 and are charged retrospectively, so a fee appearing on a statement relates to the previous monthly period.

That increased the annual cost from:

Period	Monthly Fee	Annual Cost
Before 11 May 2026	£4	£48
From 11 May 2026	£5	£60
Annual increase	£1	£12

Santander said the change was made because the cost of providing cashback benefits had increased. The bank did not reduce the 1|2|3 interest rate or cashback percentages as part of the May fee change.

Readers can check the latest changes directly on Santander’s current account changes page.

Is the Santander 1|2|3 Account Still Worth £5 a Month?

The simplest calculation is:

Annual interest + annual cashback − £60 annual fee = annual net benefit

If the result is positive, the account’s direct monetary benefits exceed the fee. If it is negative, the customer is paying more in fees than they receive through interest and cashback.

There is another calculation that matters, however:

Net Santander benefit − extra interest available elsewhere

That second calculation becomes particularly important for customers holding £10,000, £15,000 or £20,000 in the account.

Santander 1|2|3 Break-Even Calculator

A simple manual calculator can use four inputs:

1. Average 1|2|3 balance.
2. Monthly spending on 1% cashback bills.
3. Monthly spending on 2% cashback bills.
4. Monthly spending on 3% cashback bills.

The account currently pays:

• 1% cashback, capped at £5 a month, on eligible council tax, phone, broadband, paid-for TV and Santander mortgage payments.
• 2% cashback, capped at £5 a month, on eligible gas and electricity bills and certain Santander insurance premiums.
• 3% cashback, capped at £5 a month, on eligible water bills.
• 2.00% AER / 1.98% gross variable interest on eligible balances up to £20,000.

The £5 cashback limit applies separately to each percentage tier, meaning the theoretical maximum is £15 a month.

What Balance Covers the £60 Fee Through Interest Alone?

Using the 1.98% gross rate:

£60 ÷ 0.0198 = approximately £3,030

So an average eligible balance of around £3,030 generates approximately £60 of gross annual interest before considering any tax liability.

That is only a break-even calculation against the Santander fee. It does not mean £3,030 is necessarily best kept in the account rather than in a higher-rate savings product.

What Do Realistic 1|2|3 Examples Look Like?

The result changes substantially depending on the customer’s balance and bills.

Example	Approx. Interest	Cashback	£5 Monthly Fee	Approx. Annual Result
£1,500 balance + £5.55 monthly cashback	£2.48/month	£5.55/month	£5	+£36/year
£500 balance + £3 monthly cashback	£0.83/month	£3/month	£5	−£14/year
£20,000 balance + maximum cashback	About £396/year	Up to £180/year	£60/year	Up to £516/year

The first two examples are illustrative rather than representations of a particular customer’s bills.

For the £1,500 example, annual gross interest is about £29.70. Combined with £66.60 of annual cashback, total rewards are about £96.30. After £60 of fees, the annual gain is around £36.30.

For a light user keeping £500 in the account and receiving £3 cashback a month, gross interest is only around £9.90 a year. Cashback adds £36, producing £45.90 of benefits against £60 of fees — an annual loss of roughly £14.10.

How Much Spending Produces £5 Cashback?

If all spending fell into one tier, approximately:

Cashback Category	Monthly Eligible Bill Needed for £5 Cashback
1% category	£500
2% category	£250
3% category	£166.67

Real households normally have payments spread between categories, so the actual calculation should use each Direct Debit individually.

Could Moving the £20,000 Balance Produce More Interest?

This is where the calculation becomes much less favourable for customers primarily using 1|2|3 as a savings account.

The 1|2|3 rate is 2.00% AER / 1.98% gross variable. A steady £20,000 eligible balance therefore generates approximately £396 gross over a year using the gross rate.

By comparison, MoneySavingExpert’s savings table updated on 1 October 2026 showed Cynergy paying 4.55% AER on an easy-access account, while some more restrictive or promotional products were around 5%.

Rates can change quickly, so this should be treated as a market snapshot rather than a permanent comparison.

At an illustrative 4.55%:

• £20,000 × 4.55% = £910
• £20,000 × 1.98% = £396
• Approximate difference = £514 a year

That £514 opportunity cost is larger than the maximum £180 annual 1|2|3 cashback.

This does not automatically mean the account should be closed. A customer could retain the current account for eligible bills while holding most savings elsewhere.

The important point is that cashback value and savings value should be calculated separately.

How Does Santander Calculate the £5 Fee and £500 Monthly Funding Requirement?

Several details in the 1|2|3 terms are easy to overlook.

The account fee does not simply disappear in months when a customer fails to earn cashback or interest. Once the fee has started, Santander says it is taken every month, including months in which the account holder fails to qualify for the rewards.

The fee initially starts after the customer has:

• Paid at least £500 into the account; and
• Set up two active Direct Debits.

After that, the £500 funding test relates to the account’s monthly anniversary period, not an ordinary calendar month.

Transfers from another Santander personal account belonging to the same customer, including joint accounts, do not count towards the £500. Refunds to a Santander debit card are also excluded.

Transfers from a Santander Business Account, however, do count.

If there is not enough money to pay the monthly account fee, Santander can still debit it.

Where that pushes the balance beyond an arranged overdraft limit, Santander says it does not charge interest on the portion above the limit, although arranged overdraft interest can continue on the amount within the arranged limit.

What Cashback Rules Can Reduce the Amount You Receive?

The advertised “up to £15 cashback” figure is achievable only where enough qualifying Direct Debits fall into all three tiers.

Santander calculates cashback using the net amount actually paid. If part or all of a Direct Debit is refunded, the cashback calculation is reduced accordingly.

Other restrictions include:

• Payments must normally relate to the customer’s UK home and domestic use.
• Commercial Direct Debits do not qualify.
• Service, servicing, maintenance and warranty payments are excluded even if the company operates in a qualifying category.
• Each cashback percentage category has its own £5 monthly ceiling.
• Direct Debits must remain active when cashback is calculated.

Eligibility also depends on Santander’s classification of the company collecting the Direct Debit. Santander uses BACS Originator Identification Numbers, or OINs, to categorise organisations.

If a payment has been incorrectly classified, the customer can ask Santander to investigate. If Santander changes the classification, the adjustment applies from that point onwards rather than being backdated.

There is another less obvious issue: Direct Debit collection dates can move.

If a payment slips into the following statement period, two payments from the same cashback category could land in one period.

Because the £5 category cap still applies, some potential cashback may effectively be lost. Santander suggests considering a different statement date or asking the company to change the Direct Debit collection date.

What Happens to Cashback If the Account Is Closed Mid-Month?

Closing or transferring the account part-way through a monthly statement period can have an unexpected consequence.

Santander’s 1|2|3 terms say cashback earned during that incomplete statement period is not paid.

Interest is treated differently: interest earned up to closure or transfer is paid into the account when it closes.

Anyone planning to switch should therefore check the account’s cashback payment and statement dates before choosing the switch completion date.

Did Santander Increase Its Overdraft Interest Rate in May?

This requires an important clarification.

The original version of this article described overdraft charges as rising for Select and Private customers. That description can be misleading.

For the Select Current Account, Santander’s 2026 Key Facts Document shows that the interest rate on arranged overdraft borrowing above £500 remains 39.94% EAR variable before and after 11 May.

What changed was the representative APR, from 27.06% to 28.33%. Santander explicitly links that increase to the higher monthly account fee because APR takes fees and other credit costs into account.

So this should not be interpreted as a rise in the underlying 39.94% EAR simply because the APR number increased.

What Does a 1|2|3 Overdraft Cost?

The standard 1|2|3 account itself has a 39.94% representative APR/EAR variable arranged overdraft.

Santander’s example for borrowing £500 shows:

Time Using £500 Arranged Overdraft	Illustrative Cost
7 days	£3.27
30 days	£14.01
60 days	£28.12

Santander does not charge a fee for an unarranged overdraft or for refusing or allowing a payment because of insufficient funds.

What Other Santander 1|2|3 Fees Should Customers Know About?

The Fee Information Document effective from 11 May 2026 lists the following main charges:

Service	Current Fee
Monthly account fee	£5
Direct Debit	No fee
Standing order	No fee
Faster Payment in pounds	No fee
CHAPS payment	£25
Banker’s draft	£10
Counter cheque over £1,000	£10
Sterling cheque payment	No fee
SEPA payment	No fee
International payment	£25
International currency conversion	1%–3% mark-up
Foreign currency cheque deposit	£10
Foreign currency electronic payment received	No fee
Foreign-currency debit card transaction	2.95%
Foreign-currency cash withdrawal	2.95%, subject to stated exceptions

The current document is particularly important because some older or different Santander fee schedules show different SEPA charges. The 1|2|3 Fee Information Document effective 11 May 2026 shows SEPA as fee-free, not £15.

The full current charges can be checked in Santander’s 1|2|3 Fee Information Document.

What Else Changed for Santander Current Accounts in 2026?

The £5 fee was only one of three significant current-account changes Santander published during 2026.

28 April 2026: General Terms Changed

Santander updated its Banking and Savings General Terms and Conditions covering areas including:

• When accounts can be closed;
• Circumstances in which payments may not be made;
• Foreign currency cheques;
• International payments;
• ISAs;
• Statements; and
• Account and overdraft management.

11 May 2026: £5 Monthly Fee Started

The 1|2|3, Select and Private monthly account fees moved from £4 to £5.

August 2026: Annual Statement of Fees Stopped

From August, Santander stopped sending customers a separate annual Statement of Fees.

Fees and charges remain visible on normal account statements and through Online and Mobile Banking, while the annual account summary shows interest earned.

Does Tax Reduce the Value of the Interest?

Potentially.

Santander pays 1|2|3 interest gross, meaning tax is not deducted before it reaches the account.

For 2026/27, the Personal Savings Allowance remains:

Tax Position	Personal Savings Allowance
Basic-rate taxpayer	£1,000
Higher-rate taxpayer	£500
Additional-rate taxpayer	£0

HMRC adds together taxable savings interest from the person’s accounts when determining whether tax is due. ISA interest generally does not count towards this taxable savings interest.

Someone earning approximately £396 from a £20,000 1|2|3 balance may therefore pay no tax on that interest if it falls within their available Personal Savings Allowance, but other savings interest must also be considered.

How Can Customers Switch Away From the 1|2|3 Account?

Santander allows customers who do not want to accept the fee changes to close the account without charge or move using the Current Account Switch Service.

A full CASS switch normally completes in seven working days. Payments sent to or requested from the old account are redirected for at least three years after the switch.

A sensible sequence is:

1. Check when the latest Santander cashback has been or will be paid.
2. Calculate the annual interest and cashback currently being earned.
3. Compare the savings rate available for money currently sitting in the account.
4. Choose the new account and request a full CASS switch.
5. Check that transferred Direct Debits and incoming payments appear correctly after completion.

Customers generally should not manually cancel Direct Debits simply because they are using a full CASS switch. The service is designed to move payment instructions and close the old account.

As of 2 October 2026, Santander itself is offering £240 for qualifying switches into its fee-free Everyday Current Account.

Requests must currently be made by 7 October 2026, and eligibility conditions include a full CASS switch, at least two qualifying household Direct Debits, £1,500 paid into the account and at least £200 funded into a Santander Regular Saver within the stated period. The offer has exclusions and can be withdrawn.

Is Downgrading Within Santander Better Than Leaving?

Existing 1|2|3 customers do not necessarily have to leave Santander.

The Everyday Current Account currently has no monthly account fee. Santander also offers Edge accounts with different combinations of fees, cashback, interest and eligibility rules.

The right comparison is therefore not simply “Santander versus another bank”.

It can be:

Keep 1|2|3 vs change Santander account vs switch bank entirely.

Customers comparing reward-based current accounts may also want to examine how other providers structure member benefits.

For example, the Nationwide Fairer Share requirements in 2026 show how current-account activity can interact with savings and membership rewards.

The 1|2|3 and Select Current Accounts themselves have been closed to new applicants since 20 June 2023, although existing customers can continue using them.

Existing 1|2|3 customers can hold a maximum of two 1|2|3 accounts: one sole account and one joint account. Santander’s terms also state that the product may be withdrawn at any time.

Santander Select currently requires customers to hold a Santander current account and either pay their main income of at least £5,000 a month into Santander or hold at least £75,000 across qualifying Santander savings, investments and current accounts.

How Has the Santander 1|2|3 Account Changed Over Time?

The current fee increase is part of a much longer history of changes to the 1|2|3 proposition.

The account launched in March 2012, originally combining tiered interest of up to 3% with household-bill cashback and a £2 monthly fee.

The fee increased from £2 to £5 in January 2016, while the headline interest rate was reduced from 3% to 1.5% in November that year.

Further interest cuts followed:

Period	Headline 1|2|3 Interest Change
Before November 2016	Up to 3% under tiered structure
November 2016	1.5%
May 2020	1%
August 2020	0.6%
April 2021	0.3%

In April 2021, the monthly fee was also reduced from £5 to £4. This resolves the uncertainty around when the previous £4 fee began: Santander announced that the reduction would apply from 12 April 2021.

The account has since returned to 2.00% AER interest, while May 2026 brought its monthly fee back to £5.

Is Money in Santander Protected by the FSCS?

Yes, eligible deposits with UK-authorised institutions are protected subject to Financial Services Compensation Scheme rules.

The relevant limit is now £120,000 per eligible person, per authorised firm, not the old £85,000 figure still shown on some historic documents.

The FSCS limit increased from £85,000 to £120,000 on 1 December 2025. Qualifying temporary high balances can receive higher protection in certain circumstances.

Customers holding accounts with different brands should also check whether those brands share the same banking licence because the protection limit applies per authorised firm rather than separately to every account.

Frequently Asked Questions

What is the Santander 1|2|3 monthly fee now?

The fee is £5 per month (£60 a year), increased from £4 on 11 May 2026. It is charged retrospectively.

Can I keep 1|2|3 for cashback but use another bank for savings?

Yes. You can keep the account for cashback while holding extra savings elsewhere, provided you continue meeting the account requirements.

Will Santander charge me if I close the account halfway through a month?

There is no separate closure fee, but cashback from an incomplete statement period may be lost. Accrued interest is paid when the account closes.

How can I check how much 1|2|3 cashback I have earned?

Cashback appears in your account records after each statement period. You can also contact Santander to confirm how much you have earned.

Can new customers open a Santander 1|2|3 Current Account?

No. Santander stopped offering the 1|2|3 Current Account to new customers on 20 June 2023, although existing customers can keep theirs.

Will Santander increase the £5 fee again?

No further increase had been announced as of 2 October 2026. However, Santander can change account terms with the required notice.

Is the Santander 1|2|3 account worth keeping in 2026?

It may be worthwhile if your cashback and interest exceed the £60 annual fee. Compare the net return with alternative savings accounts.