NatWest is cutting cashback for 1.7 million Reward current account-holders from 3% to 2% in June and introducing a hefty £1,500 minimum monthly pay-in for new customers - though it's also cutting the account's monthly fee.

Currently account holders pay £3/month (£36/year) and earn 3% cashback when paying by direct debit for council tax, mobile, landline, pay TV, gas, electricity and broadband bills from any qualifying supplier.

From 26 June 2017 new and existing customers will see the monthly fee drop to £2/month (£24/year), but cashback on the seven types of eligible bills will also drop to 2%.

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

The changes also affect parent bank RBS's Reward account, which is the same in every respect except it's only available to Scottish customers.

The changes in full

The table below provides an overview of the Reward account changes

NatWest/RBS Reward account changes

  Monthly charge Cashback rate on household bills Minimum monthly pay-in
Now £3/mth (£36/yr) 3% N/A
From 26 June 2017 £2/mth (£24/yr) 2% £1,500 for new customers only

And here's how the cashback you can earn is set to change.

NatWest /RBS Reward cashback changes

TYPE OF BILL Typical annual cashback earnings
Low bills
Low bills
from 26 Jun
Medium bills now Medium bills from 26 Jun High bills
High bills
from 26 Jun
Water £9.30 £6.20 £11.40 £7.60 £15.60 £10.40
Council tax £28.50 £19 £36 £24 £85.20 £56.80
Energy £27.75 £18.50 £39.60 £26.40 £54.45 £36.30
Mobile phone £3.60 £2.40 £13.20 £8.80 £18 £12
Home phone £3.60 £2.40 £7.10 £4.70 £12 £8
Broadband £2.30 £1.50 £3.80 £2.50 £9.20 £6.10
Paid-for TV £0 £0 £7.20 £4.80 £21 £14
TOTAL you'll earn after fee £39 £26 £82 £55 £179 £119
(i) Amounts rounded. Based on typical bills provided by firms & Government bodies.

Low earners could be priced out

The Reward account's generous 3% cashback on a wide variety of bills has earned it a place in our cashback accounts best buy table - but lower earners may now find it a struggle to meet the new £1,500/month minimum pay-in requirement.

Sometimes it can be possible to recycle the same funds in and out of an account to meet the minimum pay-in - see our How to Jemmy guide for more on this.

If you're on a modest income and not keen on 'jemmying' your funds, you could consider Santander's 123 and 123 Lite accounts - both of which have lower minimum pay-ins of £500/month.

However instead of paying a flat 2% across the board, these accounts have a tiered cashback structure - you'll earn 3% on phone, broadband, mobile and TV, 2% on gas and electricity and Santander home insurance, and 1% on water, council tax and Santander mortgage payments.

Changes blamed on 'lower interest environment'

A NatWest spokesperson told us: “In a lower-for-longer interest rate environment we are having to make changes to our Reward current account. While others have cut the benefits for their accounts we have held our Rewards as long as we can.

"Now that we are reducing the benefit we have also reduced the cost to minimise the impact on customers. The changes we’ve made keep our account competitive and ensure our customers can continue to benefit from cashback on their household bills.”

Additional reporting by Rosie Bannister