High street bank Santander set to make yet more changes to perks on its 123 accounts - the latest in a string of cuts

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High street bank Santander will make yet more changes to perks on its 123 accounts this week – the latest in a string of savage cuts. 

From Tuesday, the bank will alter the rate of cashback it pays on some bills – while doubling the monthly fee on its 123 Lite account to £2. Unlike the mainstream 123 account, the Lite version pays customers no interest on credit balances but it has a lower fee – £2 compared to £5. 

Water bills will now attract the higher 3 per cent rate of cashback while mobile, home phone, broadband and paid-for TV bills will attract the lower 1 per cent. Gas and electricity bills remain at 2 per cent. 

Changes: From Tuesday, the bank will alter the rate of cashback it pays on some bills

The changes are disguised cutbacks. This is because households typically spend more on home communications, whereas cashback for the average monthly water bill will amount to little more than £1. 

It is a subtle change. But it comes after three interest rate cuts, a fee increase, and the capping of cashback since the account's launch eight years ago, all of which may prompt customers to look elsewhere. The bank has referred to this latest change as a 'difficult decision'. 

The mainstream account now pays 0.6 per cent interest on balances up to £20,000 and cashback on bills up to a maximum of £15 a month. But best-buy easy access savings accounts pay 0.8 per cent – and rewards offered by rival banks may also exceed what Santander will now offer by way of cashback. 

Sally Jaques, of comparison website GoCompare, says: 'Current account incentives are returning to the market. Now is a great time for customers to compare deals.' 

For example, HSBC offers £125 to those who switch to one of its Premier or Advance accounts. NatWest also provides a £125 switch deal and £3 a month cashback while Lloyds Bank pays £100 to newcomers. 

Nationwide FlexDirect pays 2 per cent on balances up to £1,500 in the first year while Halifax pays a £5 monthly reward. 

The three top-rated banks for service quality are Monzo, Starling Bank and First Direct. 

Customers in Santander's main 123 account might decide it's worth staying put as long as their returns – cashback and interest – outstrip the £60 annual fee. 

Katie Brain, banking expert at Defaqto, says: 'Some accounts offering monthly rewards have specific conditions that must be met. They should be read carefully before applying.' 

Accounts can be switched automatically with built-in guarantees using the industry-wide current account switch service. Visit currentaccountswitch.co.uk.  

THIS IS MONEY'S FIVE OF THE BEST CURRENT ACCOUNTS

Chase Bank will pay £1% cashback on spending for the first 12 months. Customers also get access to an easy-access linked savings account paying 3.8% on balances up to £250,000. The account is completely free to set up and is entirely app based. Also no charges when using the card abroad.

Nationwide's FlexDirect Account offers 5% in-credit interest to new joiners when they switch on balances up to £1,500. This rate only lasts for one year. The account is fee free.

Halifax Reward Account pays £150 when you switch. Also earn up to an extra £75 cashback when you spend £750 each month for 3 months. There is a £3 monthly account fee, but that’s stopped by paying in at least £1,500 each month.

First Direct will give newcomers £175 when they switch their account. It also offers a £250 interest-free overdraft. Customers must pay in at least £1,000 within three months of opening the account.

NatWest's Select Account account pays £200 when you switch. The account has no monthly charges, but to be elligible for the £200, you'll need to deposit £1,250 into the account and log into mobile banking app within 60 days.

Deals picked by This is Money's specialist reporters.

Read our full best bank accounts round-up