Bank charges back with a vengeance

The newly designated 'pillar banks' are back to their old ways and charging significant transaction fees – even though taxpaying customers are the pillars the banks rest upon, writes KEVIN CASEY

MUCH LIKE death and taxes, banks are unavoidable. Even when they try their damndest to do themselves in, the superhero State comes to the rescue, swooping in and lifting them out of danger just before they hit the rocks.

And the banks’ way of showing gratitude? Bringing back fees and charges on their ever-supportive customers.

In 2005, new entrants to the Irish banking market forced the hand of the old guard and all the major banks abolished account charges.

In 2012, that brief era of competition which ended so disastrously is over. Now the newly designated “pillar banks” are back to their old ways and charging significant banking fees – even though taxpaying customers are the pillars on which the banks rest.

In March, Bank of Ireland reintroduced charges and AIB is bringing them in at the end of May. Millions of people glancing down at their current account statements are getting a nasty little surprise as they see a line about bank fees stuck in the debit column. It’s quite the little kicker.

The new Bank of Ireland charges for a standard personal account cover the full range of everyday activities including ATM withdrawals, debit-card transactions and lodgments.

It does not have a standing charge and is offering two payment options. “Pay as you Go” with a 28c charge for every transaction or “flat fee” which is €11.40 per quarter. This “flat fee” set-up is limited to 90 transactions over a three-month period. Any additional transactions are charged at 28c each.

If you think you’re likely to make more than 40 transactions in a three-month period, then accepting the €11.40 (€45.60 pa) rate is recommended by the bank. However, don’t forget that this rate allows only 90 transactions (which is one transaction a day on average) before additional charges kick in.

And that’s without getting into direct debits, standing orders or other fancy stuff.

For married couples and joint account holders, under normal circumstances it is unlikely to take a full quarter to reach the 90-transaction threshold.

Possibly as some kind of marketing ploy, the Bank of Ireland is touting a “no transaction fees” offer.

The deal here is that you have to maintain a balance of €3,000 in your current account for the duration and run at least €3,000 through the account per quarter (say, your salary), as well as contrive to manually perform nine payments, to qualify for free banking.

Woe betide anyone who falls short on any of these criteria even for a moment because you will be liable for the full schedule of charges.

Anyone smart enough to have €3,000 to park will probably notice that if they lodge it into a savings account at 3.1 per cent, by a simple interest calculation they stand to make €93 pa.

With inflation eating away, it would not be rational to keep the money in a zero-interest current account in the hope of reducing banking fees. Reading between the lines, it looks like Bank of Ireland does not really want anybody to take it up on its free banking “offer”.

As an aside, it is curious to note as you flick down through its brochure of fees and charges that customers of Bank of

Ireland in Northern Ireland and Britain do

not have to pay fees at all.

In a similar vein, AIB demands that you maintain a balance of €2,500 to avail of its free banking. Otherwise, it imposes a quarterly standing charge of €4.50 (€18pa) on standard accounts.

Thereafter, it levies 20c for every self- service transaction such as ATM withdrawals, Laser card payments and online banking transactions.

As the financial analyst Joe Brennan

points out in a recent post about the AIB fees on his Money Guide Ireland blog ( moneyguideireland.com), in running their household, the charges for an average family can add up fast.

“If they use a debit card 10 times a week, use an ATM twice a week, write one cheque a week and have four direct debits a month, they will be charged €42.80 in fees in a quarter (€171.20 a year).”

With daily updates, moneyguideireland. com analyses Irish consumer-level money matters from banking to online shopping, insurance and electricity. He has worked out the comparisons.

So what bank does Brennan use? “I’m with Ulster myself,” he says, “and there are no charges at all (yet).”

If Ulster Bank’s “no fees” sounds good and you are not already a customer, switching banks is not quite frictionless but the hard work is done by the bank once you make the decision to move.

It brings across your direct debits and standing orders and contacts your employers to pay into your new account. The whole process takes about 10 days. There are no transaction charges or standing charges on a standard account with Ulster Bank.

There is also a fairly attainable set of criteria to qualify for free banking with Permanent TSB on its “Everyday Bank Account”, although National Irish Bank charges a standing fee of €20pa on its basic 24/7 account, plus transaction charges starting at 25c and rising.

Despite the hardship, for whatever reason, people are reluctant to switch banks. It could be because of their life-long affinity to the brand, convenience or other practical/ intangible reasons. The banks know this and are depending on people’s inertia to stop them slipping the noose.

In the interests of saving money, perhaps it would be easier to persuade people to adopt a new plastic card rather than divorce their banks.

Done well and cost-efficiently, utilising the Mastercard prepaid debit card is one convenient, safe and versatile way to slash banking fees.

The basic idea is that you load the card with cash and it is accepted anywhere the Mastercard credit card is accepted – most shops, card terminals and even on the internet. It is secured by chip and PIN.

It is very important when selecting a Mastercard debit-card provider not to fall into the bear pit of top-up fees, surcharges and penalties for inactivity. These caveats have the ability to destroy your spending power.

Thankfully, there is one company in the market that has a straightforward annual fee structure of €10 with no sneaky pitfalls.

“Moneybookers is the best in my opinion because it has the lowest fees,” says Brennan. In his final analysis, one could run a prepaid Mastercard debit card provided by Moneybookers for €10 a year, far less than rival providers.

A card such as this could be the key to slashing your bank transaction charges, even if you’re sticking with your same old bank.

Take the scenario where you use your Laser card to load it up just four times a month with the readies.

You could pay with plastic any time you like and end up with just 12 billable transactions on your bank statement in each quarter.

ATM transactions with this card are relatively expensive (€1.80), but you could use the cashback facility to get cash out.

Theoretically, there is almost no limit to how much you can save by cascading your cards in this manner.

If you migrate from just nine to 13 basic transactions a quarter over on to the Mastercard prepaid debit card from Moneybookers, it will pay for itself for most people.

Prepaid Mastercard – cutting annual bank fees in half; saving: €85.60; getting one up on the bank trying to squeeze you dry – priceless.