Santander has unveiled a 'lite' version of its 123 current account in a bid to attract lower-earning customers and those without big savings.

Like the original 123 account, 123 Lite offers cashback on household bills, but you won't earn any interest on your balance – arguably the most popular feature of the original.

The 123 Lite account comes with a monthly fee, but at £1/month it is considerably cheaper than the 123 account, which will set you back £5/month.

See below for full analysis, and check out our Best Bank Accounts guide to find the best account for you.

How does 123 Lite work?

You need to pay in at least £500/month, pay out at least two direct debits each month and log on to online or mobile banking at least once every three months to receive cashback.

Cashback is on qualifying bills paid by direct debit, and it's awarded in the following way:

  • 1% on water and council tax bills and Santander monthly mortgage payments (though mortgage cashback is capped at £10/month)
  • 2% on gas and electricity bills and Santander home insurance
  • 3% on mobile and home phone bills, broadband and paid-for TV packages

The amount of cashback you've earned is worked out automatically by Santander and paid into your account once a month.

You'll receive paperless statements which you can view by logging on to online banking, unless you require them in an alternative format such as Braille.

How does Santander 123 Lite compare with the original 123 account?

123 Lite offers some of the features of the 123 account, such as cashback on bills, but differs in a few significant ways, as this table shows:

Santander 123 account comparison

Features 123 (original) 123 Lite
Minimum monthly pay-in £500 £500
Minimum monthly direct debits At least two At least two
Cashback on household bills Up to 3% Up to 3%
Interest on credit balances Up to 3% on balances over £1,000 None
Online/mobile banking No requirement to use these Paperless, and you must log on at least once every three months
Monthly fee £5 £1

If you currently have a 123 account and you want to move it to the Lite, you can request a transfer in branch or by phone - you'll keep the same account details and all payments will be transferred across.

How does it compare with NatWest's Reward account?

NatWest offers a similar Reward account* which pays a flat 3% cashback on bills that you pay by direct debit – council tax, mobile and landline, TV, water, gas, electricity and broadband – though it comes with a higher monthly fee of £3.

We've crunched the numbers to see how the accounts compare.

Santander 123 Lite – cashback earned

Type of bill Cashback % Annual cashback
   
Low bills
Typical bills
High bills
Water
1%
£3.10
£3.80
£5.20
Council tax
1%
£9.50
£12
£28.40
Energy
2%
£18.50
£26.40
£36.30
Mobile phone
3%
£3.60
£13.20
£18
Home phone
3%
£3.60
£7.10
£12
Broadband
3%
£2.30
£3.80
£9.20
Paid-for TV
3%
£0
£7.20
£21
Fee
£12/year
TOTAL after fee  
£28
£61
£118
TOTAL after fee if you have a Santander mortgage*  
£58
£127
£238
*Based on low, typical and high mortgage payments; cashback capped at £10/month.
Amounts rounded. Based on typical bills provided by firms & government bodies.

NatWest Reward account – cashback earned

Type of bill Cashback % Annual cashback
   
Low bills
Typical bills
High bills
Water
3%
£9.30
£11.40
£15.60
Council tax
3%
£28.50
£36
£85.20
Energy
3%
£27.75
£39.60
£54.45
Mobile phone
3%
£3.60
£13.20
£18
Home phone
3%
£3.60
£7.10
£12
Broadband
3%
£2.30
£3.80
£9.20
Paid-for TV
3%
£0
£7.20
£21
Fee  
£36/year
TOTAL after fee  
£39
£82
£179
Amounts rounded. Based on typical bills provided by firms & government bodies.

As the tables above show, unless you've a Santander mortgage, the NatWest Reward account usually comes out on top for annual cashback earnings, whether your household bills are low, typical or high.

The big question – is the 123 Lite account worth getting?

As with any bank account, the Santander 123 Lite account has its pros and cons, and whether it's worth getting depends on your circumstances.

  • If you've got a Santander mortgage and few savings, the cashback offered by 123 Lite makes it a big winner.
  • If you've savings, it's worth looking at an account which pays interest as well – the main Santander 123* account pays up to 3%, for example, and you'd only need to have £2,400 in the account to cover the extra £48/yr of fee with the interest you'd earn.

    If you've a small amount saved, it could also be worth looking at TSB's Classic Plus* which pays 5% AER on up to £2,000 or Club Lloyds, paying 4% AER on £4k-5k. For full info and options, see Best interest-paying current accounts.
  • If you just want cashback, haven't got savings and have a Santander mortgage then, after fees, the cashback you'd earn with the 123 Lite will likely beat the NatWest Reward account below (£127/yr versus £82/yr for medium bill payers).
  • If it's just cashback you're after and you haven't got a Santander mortgage, however, the NatWest Reward* account comes out as the winner (£82/yr versus £61/yr). For a £3 monthly fee this account pays 3% cashback on council tax, mobile, landline, TV packages, energy & broadband bills (but no in-credit interest).
  • Many with smaller bills are better off getting free £150 and £4+/mth. If you've smaller bills, the Co-op Bank* pays you £150 for switching. Then sign up to its Everyday Rewards scheme to get £4/mth, plus 5p per debit card use, up to £1.50/mth so that's a max £216 in year one and £60/year afterwards.

For more info and full pros and cons, see our Best Bank Accounts guide.