The best bank accounts for cashback

Santander is capping the amount of cashback you can earn on its current accounts. We reveal what's changing and explain how they compare to rival cashback accounts from the likes of Lloyds, Halifax, and more.

We regularly write about the benefits of using cashback credit cards wisely but not everyone likes using a credit card to pay for their spending.  

If you prefer to manage your money with a debit card, you can still earn some extra cash by moving to the right current account.

We'll take a look at some of the top cashback current account offers available right now, but first we wanted to highlight some big changes to two of the most popular options on the market.

Santander caps cashback, cuts savings rate

Santander is taking the axe to both its 123 and 123 Lite current accounts, dramatically reducing incentives on offer from May.

We'll explain in more detail what this will mean to customers in the dedicated section below, but the headline changes are a new cap on how much cashback you can earn plus a reduced savings rate on the 123 account.

It comes not long after NatWest and RBS announced its customers will soon no longer be able to earn cashback for paying bills from their reward accounts (more on that later).

So let's dive straight in and see what's changing.

Santander 123

The Santander 123 Current Account lets you earn up to 3% cashback on specific household bills.

There are effectively three tiers: you get 1% on water and Council Tax bills, as well as the first £1,000 you pay towards your Santander residential mortgage (so up to £10 a month).

You also earn 2% cashback on gas and electricity bills as well as Santander home insurance and life protection premiums, while you get 3% back on mobile, home phone, broadband and paid-TV contracts.

While these rates remain unaffected, from May 5 the maximum amount you can earn will be capped at £5 per tier, meaning a maximum benefit of £15 a month.

The change will obviously hit those with sizeable monthly bills the hardest – especially those with a Santander mortgage who can currently earn up to £10 a month on that alone.

That would be bad enough, but the bank has also announced it is cutting the rate you can earn on balances up to £20,000 from 1.5% to just 1%, meaning you'll earn £100 less interest every year on the maximum balance.

Given that there are a number of access savings accounts out there paying between 1.3% and 1.4% (all of which allow you to hold larger balances to boot), there isn't really much point holding your cash in the Santander 123 account come May.

Throw in the fact that the account charges a £5 monthly fee, and it's hard to make a case for it.

If you are still keen, note that you must pay in at least £500 a month and set up at least two Direct Debits to qualify – although you'll probably want to set up most of your eligible bills to earn cashback on them.

But before you do apply, you should definitely take a look at Santander's cheaper alternative...

Santander 123 Lite

The Santander 123 Lite Current Account offers the same cashback rates as the 123 account above, but only charges a £1 monthly fee.

The key difference is that it doesn't offer the savings incentive on balances of up to £20,000 but, as you can get a better rate on your savings elsewhere, that's not really an issue.

So it has all the same cashback incentives for a fifth of the price.

To qualify for the perks, you need to pay in at least £500 a month, have two active Direct Debits and log in to online or mobile banking at least once every three months.

Lloyds Bank

Lloyds Bank offers customers with a Club Lloyds, Classic, Student or Basic account access to the Everyday Offers cashback scheme.

It allows users to earn up to 15% cashback when they shop at certain retailers using a debit or credit card, in store or online.

Lloyds Bank, Halifax and Bank of Scotland launch Direct Debit cashback offers

Club Lloyds offers 1% interest on balances of up to £4,000 and the choice of either six cinema tickets, an annual magazine subscription or an annual Gourmet Society membership, as well as Everyday Offers.

You’ll have to pay £3 a month if you pay in less than £1,500 a month.

Lloyds sign. (Image: Shutterstock)

Halifax

Halifax offers access to a scheme called Cashback Extras, allowing you to earn up to 15% cashback when you shop at certain retailers using your debit or credit card, in store or online.

The offer applies to the Basic, Student, Reward and Ultimate Reward current accounts.

The Reward current account may be worth looking at.

It pays £2 a month, providing you credit the account with at least £750 each month, pay out at least two Direct Debits per month and manage to stay out of the red.

NatWest branch. (Image: Shutterstock)

NatWest and RBS Reward

The NatWest and RBS Reward accounts currently pay 2% cashback on your Council Tax, water, gas, electricity, mobile, landline TV package and broadband bills, as long as you pay by Direct Debit.

You also earn 1% cashback when you spend with partner retailers such as Caffe Nero in return for your £2 monthly fee.  

The accounts have always been among the most popular on the market as a result of its generous benefits but, as we mentioned at the start, the banks are completely overhauling the offer in the coming months.

From next month, you’ll no longer receive 2% cashback, but instead will receive a fixed amount, which depends on having at least two Direct Debits set up and you logging into the account every month.

According to NatWest, those with a Reward, Reward Silver or Reward Platinum account will earn a maximum of £5 per month in rewards under the new offer.

This comprises £4 a month for two Direct Debits and £1 for logging onto the mobile app each month.

Customers with a Premier Reward account will get up to £10 per month in rewards under the changes (the two Direct Debits are worth £9, plus £1 for logging into the mobile app).

To help clarify the maximum reward you can earn (after any monthly fees) once the changes are implemented, check below based on your bank account.

  • Reward: Earn up to £36 per year;
  • Premier Reward: Earn up to £96 per year;
  • Reward Silver: The £10 monthly fee is double the amount of cashback on offer, so it’s not worthwhile for cashback benefits alone (but you get European travel insurance, mobile insurance, discounts etc);
  • Reward Platinum: The £20 monthly fees amount to four times the maximum amount of cashback on offer, so it’s not ideal for cashback alone. This account does offer other benefits such as worldwide travel insurance and UK car breakdown cover.

Looking at the Reward account, you'll likely lose cashback under the new rewards scheme.

NatWest and RBS estimate that Reward customers currently earn on average £83 a year in cashback (£59 when the monthly fee is included) based on typical monthly bills of £345.

From February, they'll earn a maximum of £60, or £36 after fees. 

The picture is rosier for Premier Reward customers given the more generous £120 perks (£96 after fees), though it really depends on your personal spending habits as to whether the accounts are still worth going for once the changes kick in. 

If you are still keen to sign up, it’s worth noting that you can bag a £150 sweetener if you switch to RBS by 29 November or NatWest by 6 December.

Co-operative Bank

Co-operative Bank customers can opt into the Everyday Rewards scheme with a current account or an Everyday Extra current account.

Everyday Rewards offers the chance to earn up to £5.50 a month for everyday banking.

But the cashback offer comes with a list of caveats.

The first £4 is earned so long as you pay in at least £800 each month, stay in credit, opt for paperless statements, log into online banking at least once a month and have a minimum of four Direct Debits.  

Account holders can also earn an extra 5p every time they use their debit card, up to £1.50 a month. This brings the total up to £5.50 a month or £66 a year.

You can opt to keep the cashback or send it to one of five charities: Amnesty International, Hospice UK, Oxfam, Refuge or The Woodland Trust. 

On the plus side, there's no monthly fee (unless you opt for the Everyday Extra account), so you'll receive or donate the full amount you earn.

Barclays

The Barclays Bank Account with Blue Rewards is also worth considering.

Providing you are a current account customer aged 18 or over, deposit £800 a month, have two Direct Debits, and sign up to online or mobile banking, you'll be paid £7 a month.

There’s a £4 a month fee, so you'll actually only pocket £3 a month.

If you have a Barclays mortgage, you'll get an extra £5 a month and with home or contents insurance, you can get up to an extra £3.

Switch to Barclays and turn on Blue Rewards before 30 November 2019 and the bank will double the rewards for a year.

Getting other financial products from your main bank can often be a false economy, so you need to be sure that your deal is a good one excluding any cashback benefit.

Compare current accounts

This article is regularly updated

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How to get free and cheap cinema tickets

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