NatWest and RBS – both part of the RBS Group – are launching a new current account next Monday, which will pay 3% cashback on household bills for a £3/month fee.
The move sees the sister banks attempting to challenge the likes of Halifax, Santander and Nationwide by offering incentives to hold your current account with them. See our Best Bank Accounts guide for more info on accounts that pay up to 5% interest, give a £150 switching bonus, or offer free travel-insurance.
But our analysis shows the new 'Reward' current account is only a good option for those with no savings who spend more than £270 per month on bills. Here's why...
What is the account?
Available from 12 October 2015, the Reward account will pay 3% tax-free cashback on seven household bills – as long as they're paid by direct debit from the account.
However, there's a £3 per month fee, meaning you'd need to spend over £100 each month on all eligible bills combined to start earning any net profit from it. The bills that net you cashback are as follows:
- Council tax
- Water (if you live in Scotland, water is included in your council tax bill, so separate cashback is not available)
- Home phone (including line rental)
Plus, as long as the bills are for personal (not business) use, there is no cap on the cashback amount you can earn, eg, if you pay a child's mobile phone bill or electricity bills on a holiday home from the account as well as your main mobile and electricity bills, you'll also earn 3% back on those.
Unlike many current accounts, the Reward account will not have a minimum monthly pay-in or minimum balance, and doesn't require you to have a minimum number of direct debits set up – though as outlined above, to earn the rewards you need to have all your bills on direct debit from the account.
How much could a typical person earn in cashback?
To calculate how much people could typically earn, we polled more than 2,000 users and asked them how much they spend on bills each month. The results reveal:
- Those who are single with no dependents spend on average £250.01 to £300 per month on bills, with 17% spending more than £400, meaning this group could make on average £54 to £72 cashback per year, after the fee.
- The average spend both for couples with no dependents and adults with dependents is £300.01 to £400 per month, with 21% spending more than £500. So on average they'd get between £72 and £108 cashback per year, after the fee.
- Overall, 97% of people answering our poll would earn at least £15 cashback per year, after the fee, while the most someone who answered our poll would earn is at least £324 per year, although this was only 1.5% of those who answered.
So how does this compare with other current account bonus schemes?
To evaluate whether the account's any good, we've compared it to providers offering similar cashback deals. The Santander 123 account does pay up to 3% in-credit interest on up to £20,000, but we've assumed you have no savings for this comparison. We've also not taken into consideration accounts offering switching incentives.
Here's how the Reward account compares on this basis:
How does NatWest/RBS's current account compare? (i)
|Min monthly income/pay-in amount
|Min standing orders/direct debits
|Typical rewards/year after any monthly fees
|3% cashback on certain bills
|None (but you need them set up on bills to earn cashback)
|£15 - £324 (ii)
|Barclays Blue Reward*
|Up to £12/month or £144/year rewards depending on which Barclays products you have
|Two direct debits
|£48 - £144 (iii)
|£5/month (after tax)
|Two direct debits
|Santander 123* (iv)
|Up to 3% cashback on certain bills (plus 3% in-credit interest on £3k-£20k (v))
|Two direct debits
|£11 - £190 (vi)
(i) Based on monthly rewards and not taking into account switching bonuses or in-credit interest. (ii) Based on upper and lower bill expenditure from our poll, £3/mth fee deducted. (iii) Barclays doesn't tax rewards, but you should check if you need to declare anything as income tax (iv) From January, Santander's 123 account will have a £5/mth fee. It currently has a £2/mth fee. (v) 1% on £1k-£1,999.99, 2% on £2k-£2,999.99 (vi) Based on MSE's calculation of typical low and high bills, £5/mth fee deducted, assumes you have a Santander mortgage, based on cashback only – in-credit interest not included.
How good is NatWest's and RBS's customer service?
In MoneySavingExpert.com's latest biannual banking poll where we ask readers to rate their bank's customer service, NatWest came 10th out of 13 providers with 13% of customers polled rating it "poor" and 44% rating it "great".
RBS meanwhile came second from last in 12th place, with 18% rating it "poor" and just 43% rating it "great". In comparison First Direct came top, receiving a 92% "great" rating with only 1% rating it "poor".
The banking group has also been plagued with technical problems; in June approximately 600,000 incoming and outgoing transactions were delayed for a few days evoking memories of the RBS Group's nightmare 2012 outage that saw millions unable to access cash for days or weeks.
So is the Reward account any good?
Overall, we've calculated you need to spend at least £270 a month on bills to earn more cashback with NatWest/RBS in a year than you could with Halifax, Santander and Barclays – assuming you don't have mortgages with the latter two and assuming you're not earning any in-credit interest with Santander – once any monthly fees have been taken into consideration.
In this scenario, you'd earn £61+ in cashback annually. But those with savings could likely earn more in an interest paying account, such as the Santander account listed, while switchers can also earn bonuses of up to £150 elsewhere – see our Best Bank Accounts guide for more on this.
Helen Saxon, money desk leader at MoneySavingExpert.com, says: "This new account from RBS and NatWest is certainly better than nothing as long as you pay more than £100 per month in bills. The fact there's no minimum monthly pay-in means it could be a good deal for those with irregular incomes.
"Compared to similar banks' offers, this account wins if you spend more than £270 a month on bills. Yet, if you have savings, there are current accounts that will pay you up to 5% interest, and there are some banks which'll pay you up to £150 free cash to switch, so make sure you've considered all the options before deciding on an account."
I've decided the account's for me. How do I get the cashback?
There are three different ways you can get your hands on the rewards earned, which you can cash in as soon as you reach £5. You don't have to stick to just one method of redemption, you can change how you use the money each time. Here's what you can do:
- Get cash paid straight into your NatWest/RBS account.
- 'Trade up' your rewards to spend at retailers such as Cineworld, Caffe Nero and Curry PC World, which will allow you to get a better return at some retailers eg, £5 in rewards can be swapped for a £10 Caffe Nero voucher. However, retailers have set their own limits on how often you can redeem rewards for more than their value, so check.
- Donate your earnings to one of the banks' four chosen charities: Barnardo's, Cancer Research UK, Macmillan Cancer Support and NSPCC.
The rewards will be managed via 'MyRewards', currently known as Cashback Plus, a scheme where you can track your savings and redeem rewards. This is available through NatWest and RBS's online banking and mobile apps. But if you don't have online banking, you can still redeem rewards over the phone or in branch.
If you hold a packaged account with NatWest or RBS, you can switch to the new Rewards packaged account, where you'll earn 3% cashback for £2 per month, plus your normal account fee.
If you hold a Reward credit card, the annual fee will also be refunded if you also hold the Reward current account. This card isn't a best buy though, see our Credit Card Rewards guide for our top picks.