Ask Our Expert

Santander Zero account

Dear Chris, I’ve seen that Santander is offering a Zero current account with no overdraft fees, and I quite fancy getting one.

I have been caught out several times with bank charges, and now the banks have won the court case, it looks like I’m not getting them refunded. So, at least preventing myself getting charged again would be good.

However, I see you need to switch your mortgage to Abbey to get the account. Is this a good idea?

Dave, via email on 1 December 2009

Our expert says...

The Santander Zero current account caused quite a stir when it was revealed last month and it definitely has some attractive benefits, including the following:

It is unique on the high street as it will charge no overdraft fees, including no authorised or unauthorised fees and no charges for paid or unpaid items
The overdraft interest rate is competitive at 12.9%
It will charge no foreign exchange fees and no fees for use of ATMs worldwide
It offers 6% interest on balances up to £2,500 for one year, providing you pay in at least £1,000 a month.

It is a great looking package, and most other current accounts deals can’t match its features.

However, to be eligible for the Zero account, you must switch your mortgage to a Santander-branded bank.

The Zero account will be available from January exclusively to Bradford & Bingley and Abbey mortgage customers, and later in the year to Alliance & Leicester mortgage customers when it is rebranded as Santander.

As Bradford & Bingley is no longer taking on new mortgage customers, to become eligible for the Zero account in January, you will need to switch your mortgage to Abbey – and this is a big deal.

Your mortgage is a huge financial product and getting the best product for your circumstances is crucial.

Even a small difference in rate can make a massive difference to the amount you pay overall. For example, a £180,000 mortgage over 25 years at 6% interest will cost over £3,000 more in interest than the same mortgage at 5.9%, and over £16,000 more than the same mortgage at 5.5%.

For this reason, it’s essential that you find the lowest rate mortgage available to you, and unless Abbey offers this, it would be unwise to switch your mortgage just to get the Zero current account.

If Abbey’s mortgages aren’t the cheapest for your circumstances, then you risk the benefits of the current account being wiped out by the increased cost of your mortgage.

If you had the mortgage described above, and you could get a deal at 5.9%, but opted for an Abbey deal at 6%, you would be paying £11 a month extra, just to get the Zero current account.

If you turned down a 5.5% offer elsewhere, you’d effectively be paying a monthly premium of £54 to get the Zero account.

It’s advisable to use a whole-of-market mortgage broker to help you find the best deal. If you find that Abbey has the best mortgage for your circumstances, then the Zero current account is a great bonus, but otherwise, it would be unwise to switch your mortgage simply to become eligible for it.