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Santander Zero Account

Current Account
Published 22 November 2009
Helpful? 3
Open Quote Good news if you already have a competitive Abbey or Bradford & Bingley mortgage. But mortgage costs have a far bigger impact on most people's finances than current account charges, so don't let this account distract you from the big picture. End Quote
Thumbs Up
  • No overdraft, bounced payment or overseas debit card transaction fees.
  • 6% interest on balances up to £2,500 during the first year.
Thumbs Down
  • Only available to Abbey and Bradford & Bingley mortgage customers.
  • Credit interest falls from 6% to 1% after first year.
Candid Rating
4.2
Candid Charges
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Overdraft 12.9%

Abbey has set the cat amongst the pigeons with the launch of their Zero current account, available from January 2010.

Most banks and building societies have come under heavy fire for levying excessive current account charges when customers go overdrawn or use debit cards overseas. Abbey appears to tackling such critics head on with this new account, which promises no fees for overdrafts, bounced payments and overseas debit card transactions.

The account will also pay interest on accounts in credit, at 6% gross for balances up to £2,500 during the first year but falling to just 1% thereafter.

So is there any bad news? Well, although no overdraft fees, overdrafts will incur 12.9% interest. While steep, it’s far lower than the market average of 18.96% (source: Bank of England) and will be one of the lower rates on the market, although not the lowest. You'll also need to pay in at least £1,000 a month.

A bigger turn off is that you’ll have to be an Abbey or Bradford & Bingley mortgage customer to open the account. If you’ve already got a mortgage with either lender at a rate you’re happy with, then the zero account is a welcome bonus. But there’s no point taking out a mortgage with either just to get a zero account, unless that mortgage happens to be the best deal for you.

At the time of writing Abbey is offering some very competitive fixed rate and tracker mortgage deals, but customers on Abbey’s standard variable rate are paying a not so attractive 4.24%. These customers would almost certainly save a lot more money by switching to a better mortgage deal rather than opening a Zero account.

Abbey should be applauded for taking the lead by offering a no-fee current account and, if you do qualify, it’s a good deal. But let’s not forget, Abbey is in business to make money, and the requirement that you have an Abbey or Bradford & Bingley mortgage to get a Zero account suggests this account is more a mortgage marketing carrot than a genuine attempt to bring no-fee banking to everyone.

If you open a Zero account then keep a very close eye on your mortgage rate in future, as the benefits of free banking could be quickly outweighed by an uncompetitive mortgage rate. For example, on a £150,000 20 year repayment mortgage the difference in annual payments between 4.5% and 3.5% mortgage rates is around £950 – that’s a lot of current account fees!

Web Link: http://host.abbey.com/accounts/zero-account/index.php

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