Get the best from your bank and relief on rent reduction
Sinead Ryan and Charlie Weston’s expert advice in Personal Finance
PLENTY of people were quick off the blocks to criticise AIB when it forged ahead with charging for contactless payments just as the Covid-19 pandemic was creating financial panic.
The long-planned but ill-timed move had to be back-pedalled, but given the massive saving to customers was all of one cent for each transaction, it’s a great pity people didn’t give more regard to the far more costly ways they’re being charged by their banks for everyday transactions. AIB is expensive but it’s not the worst. Ulster Bank quietly continued to charge the contactless fee with no outcry.
Indeed, it’s possible to pay nothing at all for a current account, and yet few avail of that either.
Switching current accounts is a slow burn. On one hand I hear people say “they’re all the same”, on the other, “why am I being ripped off?”
Banking isn’t free. Indeed, the mistake financial institutions made during the boom was giving the impression it was, so busy were they vying for borrowers.
But the amount you pay, and for what, deserves scrutiny and that’s what I’m looking at this week.
There are roughly five million current accounts held by personal customers, holding more than €30bn. The Central Bank reported in a study that just 1,542 people switched from one bank to another over a six-month period in 2018. But there are differences between operators, and you can spend up to €100 a year on banking charges needlessly.
Fees come typically in two ways: an account maintenance charge (this is literally paying your bank to hold onto your money) and transaction charges (each time you withdraw, tap, move or buy from the account), which vary greatly (see table below).
You can typically avoid some charges if you leave a lump sum lying in your account, but most people can’t afford this (or find it too stressful to remember). Basic accounts
Under EU law, a little-known act requires every bank to offer a ‘basic’ current account to customers, for free, with no maintenance or transaction charges. And they do, but none will deploy any advertising money on the fact. They are simple accounts, without credit (overdraft) facilities, no chequebook and perhaps limited to a debit card, although some allow Google/Apple Pay facilities. Four (Ulster Bank, Bank of Ireland, KBC and Permanent TSB) only allow minimum wages to be deposited (ie minimum hourly wage x 40 hours x 52 weeks which amounts to €21,008 this year). Sister banks AIB and EBS do not have this restriction.
Fintechs
German e-bank N26 and, even more so, Revolut have shaken up the staid world of banking. The latter reported a million Irish accounts last month (although it’s hard to know how many are active), and younger customers in particular love the cash-sharing features and easy to use app. Although Revolut offers a ‘free’ service, it is only for a maximum of €200 in withdrawals each month; after that it charges 2pc, which is hefty. Its ‘paid’ accounts cost €7.99pm (Premium) and €13.99pm (Metal). N26’s ‘You’ account is €9.90pm and its Metal account costs €16.90pm plus transaction fees for more than five withdrawals, but comes with limited travel insurance.
Before signing up, do your homework on charges as you may not save anything. However, neither bank is offering credit (overdraft or loans) in Ireland yet.
Dormant accounts
You’d be amazed at the number of accounts that lie idle, untouched and forgotten about by people who have moved bank, moved away or died without telling anyone they have left money. The Dormant Accounts Act was set up in 2001 which allows the State take over the funds in a bank or post office account which has had no transactions in 15 years. The money is distributed for good causes, but if such an account is discovered/ remembered, you can apply to have the money refunded. Some €30m was spent in this way in 2019.
Switching accounts
A new code of conduct for switchers was introduced a few years ago; 99pc of those who do switch complete it within 10 days. Your bank must provide you with a switching pack, and you notify anyone who lodges to your account (eg employer, social welfare) of the new account. The bank will do the rest for direct debits etc. They don’t have to take your overdraft, if you have one, but most are happy to renegotiate terms on this. Check out the ccpc.ie guide on this.
Bear in mind, the post office and your local credit union also offer current accounts and they are worth checking out, so I’ve included them below. Neither are free, nor cheaper, but they may be handy for you, if you don’t have a bank branch nearby.
Fee waivers
Pensioners and students don’t pay fees on current accounts, but if you are, it’s worth checking with the bank that you have been moved to the ‘right’ account for you.
The amount that you pay, and for what, deserves scrutiny