Santander launches new 'Edge' current account paying 1% cashback on bills, groceries & travel – is it any good?

How the Santander Edge current account works

The Santander Edge* current account's main draw is its 1% cashback, yet it's not paid on everything. The account's main features include:

• 1% cashback on household bills. This includes water, council tax, gas and electric, broadband, mobile and paid-for TV bills, capped at £10 a month. Unlike with the 123 Lite, Santander mortgages are NOT included.

• 1% cashback on supermarket and travel spending. This includes supermarkets, grocery shops, convenience stores, food markets, speciality food outlets, vending machines, petrol, electric vehicle charging, and train, bus and ferry fares (air travel is not included). This cashback is also capped at £10 a month.

• Access to a linked savings account paying 4% AER interest on up to £4,000. So this'd give you a maximum of about £157 interest in a year (it's not £160, as if you have the maximum, interest will take you over the £4,000 limit, and you won't get interest on that interest).

• There's a £3 monthly fee. And to get the cashback, you have to pay in at least £500 a month and set up two active direct debits.

This means that after the £3 monthly fee, you can get a maximum of £17 a month cashback – though you'd have to shell out a hefty £1,000 a month on bills AND £1,000 on supermarket/travel spending to get this. For many people who spend less than this each month, the gain will be much less. Below we've calculated some estimates for what a family paying average bills might get in cashback...

So, on average bills, you'd expect to earn about £8.80/month (£105/year) in cashback after the fee. Though if you're able to keep £4,000 in the linked saver, you can earn an extra £157 on top. 

If you pay out more or less than these average bills, you can work out what you could earn using Santander's Edge cashback calculator.

How Santander Edge compares with Santander 123 Lite for existing customers

Although Santander's 123 Lite is now closed to new customers, existing customers can continue to use their Lite account as normal. For £2 a month, the 123 Lite gives tiered cashback of between 1% and 3%, up to a maximum of £5 a month in each tier:

• 1% on Santander mortgages, council tax, mobile, phone, broadband and paid-for TV bills

• 2% on energy bills

• 3% on water bills

So even though it offers a slightly lower maximum monthly cashback than the Edge account (£15 compared with £20), the 123 Lite does gives a higher percentage of cashback on energy and water (plus 1% on Santander mortgages).

To help explain, the table below analyses what the household with average bills from the section above would get in cashback each month from both the 123 Lite and the Edge accounts:

So, should existing 123 Lite customers switch?

As you can see, though you can earn more cashback on household bills with 123 Lite, Edge can pay slightly more in total as it includes supermarket and travel cashback on top of bills cashback.

Yet for existing 123 Lite customers, it's possible to get 1% cashback on most spending – at least for the next year – WITHOUT switching to Edge. You can do this by opening a Chase current account alongside your existing 123 Lite account, as it pays 1% cashback on almost all debit card spending, not just supermarket/travel spending (though there are a few exceptions).

Do this and you'll continue earning the higher cashback rates on your household bills, plus the extra 1%, at least for the first year. If Chase then stops its cashback, the Edge account may become a better bet (of course, we'll update you if that's the case). If you're an existing 123 Lite customer who doesn't want to use the Chase account as an add-on, it could make sense to switch to Edge – but you'll need to do the sums based on your own spending to make sure the cashback beats what you already get. The Santander Edge cashback calculator can help you with this.

If you don't have a Lite account, should you open an Edge, or are there better accounts?

First things first... if you're willing to change current account provider and are after a cash boost, you could get as much as £200 for FREE just for switching your current account. And it'll take the cashback accounts below two years or more with average bills to earn you as much as that. So, this is where we'd start if you're after a new account: the top current account switching offers.

However, if you do want an account that pays cashback, there are a number of current accounts competing with Santander's Edge. We've compared them below, but do read on below the table, as it's likely combining accounts will be most lucrative.

So, what should you do?

• If you've a Santander mortgage, combine Santander 123 (the original account, not Lite) and Chase. This gives you the highest bills cashback, and also lets you maximise cashback on your debit card spending. 

• If you've large bills (and no Santander mortgage), check which of Santander 123 (the original account, not Lite) and Edge pays YOU the most cashback – and then add Chase for spending. Your combination of bills will dictate which pays you the most – use Santander's cashback calculator to help see which account wins for your specific bills. But, again, Chase will allow you to maximise cashback on your debit card spending.

• If you've small bills, Halifax or NatWest is likely to win. If your bills are small, it's likely neither Santander account will pay you more than £5 after the fee, in which case Halifax Reward's flat £5 a month is your winner. Yet it requires you to spend at least £500 on the debit card (essentially 1% cashback), or keep £5,000 in the account at all times (the latter works out at a 1.2% interest rate, which is easily beaten). 

  If you won't do this, NatWest Reward just requires you to pay in £1,250+, pay out two direct debits and log in to online/mobile banking each month, and will give you a flat £3/month (actually £5/month, but there's a £2/month fee). 

  Again, with both, you can combine them with Chase to maximise the debit card spending cashback (though with Halifax you'll need to use Chase only after you've done the £500 required spend for the reward). 

How does the 4% on savings compare?

The Edge account also comes with a linked 4% AER variable savings account (including a 0.5% bonus, essentially a minimum rate guarantee, for a year), where you can pay in up to £4,000. The maximum interest you can earn is about £157 a year – this is because if you have the maximum in the account, and interest's paid on top, you can't earn interest on the interest.

On the face of it, this compares very well with standard easy-access accounts, which currently pay up to 2.6% AER. Put £4,000 in one of these and you'd get just £104 over the year. Fix your savings for a year and you can get 4.36% AER, so £174 interest, though it's not a direct comparison, as with fixed savings you can't access your money, whereas the Edge linked saver gives you unlimited withdrawals. 

But if you're opening a new current account and want to maximise your savings interest, Barclays' linked Rainy Day Saver offers 5.12% AER on up to £5,000. To get it, you'll need to be a Barclays current account customer and be a member of its 'Blue Rewards' scheme. For Blue Rewards, you need to be registered for online or mobile banking and pay in £800+/month. There's then a £5/month fee, though it gives £5 cashback each month you pay out two or more direct debits – so the fee's essentially waived. See Barclays Blue Rewards for full info.

Yet if you'll go for Santander's Edge account because of the cashback, the linked savings is a boon, as there are few better places to put up to £4,000 in savings and still get easy access.