NatWest Reward changes: can it still beat the Santander 123 current account? (copy)

NatWest is slashing the cashback on its Reward account from 26 June.

The rate of cashback new and existing customers can earn on household bills will fall from 3% to 2%, but to offset the change the fee on the account will be reduced from £3 to £2 a month.

Customers joining on or after 26 June will also be hit with a new requirement to pay in at least £1,500 a month and register for online or mobile banking, but existing customers won't be affected by this.

The changes are the same for the Royal Bank of Scotland Reward account, which is only available to Scottish customers.

So will the Reward account be worth keeping and how will the change impact how it stacks up to its main rival; the Santander 123 Current Account?

Santander vs NatWest: monthly fee

The Santander 123 Current Account charges a £5 monthly fee, which means you have to shell out £60 a year to use it and benefit from the perks.

The NatWest/RBS Reward account fee will fall from £3 a month to £2 a month from 26 June, which will take the annual cost from £36 to £24 a year.

At first glance, it’s pretty clear which account is cheaper, but to understand which is the most rewarding overall you will need to figure if you will earn enough cashback to cancel out the monthly cost.

Santander vs NatWest: cashback

The Santander 123 Current Account offers tiered cashback up to 3% on a range of household bills you pay by Direct Debit, which gets credited to your account each month.

You can earn 1% on water, Council Tax and Santander residential mortgage repayments (up to £1,000). There’s 2% cashback available on gas and electricity bills as well as Santander home insurance premiums. Finally, you can earn the top 3% rate on mobile, home phone, broadband and paid for TV packages.

The NatWest/RBS Reward account offers unlimited ‘Rewards’ on seven monthly household bills that you pay by Direct Debit, which can only be converted to cash once the balance reaches £5.

From 26 June, you will earn 2% on Council Tax, water, gas, electricity, broadband, mobile & landline and TV packages.

Here’s how the two accounts compare on cashback for a range of typical monthly bills once the rate changes (I’ve used my own costs for the comparison).

Household bill	Typical monthly cost	Cashback NatWest/RBS Reward (2%)	Cashback Santander 123 (1/2/3%)
Council Tax	£133	£2.66	£1.33
Water	£33	66p	33p
Gas	£45	90p	90p
Electricity	£45	90o	90p
Mobile phone	£35	70p	£1.05
TV package	£44	88p	£1.32
Broadband	£25	50p	75p
Total	£360	£7.20	£6.58

The NatWest/RBS Reward account will pay me more cashback compared to the 123 Current Account every month despite the cut to the rate.

Based on my household bills I can earn £7.20 a month with the Reward account compared to £6.58 a month a year with the 123 Current Account.

After the fees are considered that will mean I will pocket £62.40 a year by going for the NatWest/RBS deal compared to £18.96 with the Santander offer.

However, if you have a Santander mortgage and a Santander insurance policy as well as the seven other main household bills, the 123 Current Account will pay more.

I don’t have a mortgage with Santander or any insurance policies but if I did I would pocket £11.98 a month which over the year would mean I take away a much better £83.76 after the fee.

The Santander 123 Current Account may also be a more rewarding account if you have savings.

It pays 1.5% interest on balances up to £20,000, which means you could earn an extra £300 a year on top of the cashback you get.

NatWest vs Santander: monthly fee

You need to deposit £500 a month into the Santander 123 Current Account to benefit from the perks.

Right now there is no minimum monthly fee to benefit from the NatWest/RBS Reward account, however new customers joining from 26 June will have to be able to put in £1,500 a month.

So if you are thinking of opening a NatWest/RBS Reward account it’s worth signing up before it changes.

Verdict

The cashback potential of each account will differ depending on the size of your bills.

You can compare how much you’d earn with the cashback calculator on the NatWest website and the cashback calculator on the Santander website.

From 26 June the Reward account will still pay a better rate for Council Tax and water bills, however the 123 Current Account will be the one that pays more for mobile, broadband and TV bills. After the change both accounts will be equally good for cashback on energy bills.

If you don’t have any savings, it’s probably worth sticking or switching to the NatWest/RBS Reward deal. However, if you have a Santander mortgage and insurance policies and any savings you’d be better off with the 123 Current Account.

Compare current accounts to see if you can get a better deal