Banking on loyalty won't pay

BANK CHARGES:If the Bank of Ireland thought that it could bury new current account charges beneath the Christmas cheer it was to be disappointed, because consumer groups were quick to complain, writes Conor Pope

IF BANK OF Ireland hoped its pre-Christmas announcement, that it was overhauling its fees for current account customers, would get lost in a flurry of cheery ho, ho, hos it and festive snow, it was to be sorely disappointed.

Consumer groups lined up to condemn the bank the minute it became clear that only customers who maintained a minimum balance of €3,000, or lodged at least the same amount into their account over the course of a quarter and made nine debit payments using the bank’s phone and online services, would be exempt from charges.

Under current rules, Bank of Ireland customers qualify for free banking if they do just three online or telephone transactions per quarter or keep a minimum of €500 credit in their account over the same period.

From February 21st, customers who fail to meet the new criteria – with the exception of Golden Years and student account holders – will pay 28 cent for each transaction.

The bank stoutly defended the changes claiming that most of its customers would still be able to get free banking. It said the cost of maintaining the current account service was significant so it had no choice but to introduce the new charges.

It neatly sidestepped the fact that at least two other retail banks in Ireland were able to maintain a current account service without imposing charges.

The “stringent new rules” were a knock-on effect of “our failed banking system”, said National Consumer Agency chief executive Ann Fitzgerald and she urged people “to look at the charges and compare accounts that are available with other banks”. The head of the Consumer Association of Ireland Dermott Jewell said, “It is a clear message that consumers should not expect loyalty, so if loyalty is gone then we in the CAI believe Bank of Ireland customers should look towards switching to banks which offer better value.”

Fitzgerald says the charges are inappropriate, irrespective of the financial black hole the bank, along with some competitors, has dug itself into over recent years. She said the charges were “really unfair” and were targeted at the least well-off account holders.

For its part, the bank has pointed out that a person earning the minimum wage and working 35 hours a week would not have to pay charges if all their wages were lodged in their account and nine online and telephone transactions were conducted every quarter.

But Fitzgerald points out that the bank has made it “very difficult to hit the target of nine transactions a quarter because they no longer include standing orders and direct debits when calculating a number of transactions”.

She suggests one easy way people could avoid the charges: by transferring small amounts, say one euro three times a month, to a friend.

Another way to circumvent the charges was suggested by a call centre worker with the Bank of Ireland. If you owe €90 on your credit card, rather than pay it in one fell swoop, go online and make nine separate payments of €10. Alternatively, do the same thing over the phone – it will waste your time and a bank employee’s but will mean you meet the new requirements.

While consumer anger at new charges is understandable, it is a sign of our times. During the boom, the banking sector was shaken with the arrival of foreign banks including Halifax/Bank of Scotland and Postbank.

The increased competition saw all the financial institutions offering sweeteners such as free banking, tracker mortgages and high interest on deposit accounts. With the bust, the overseas banks have largely disappeared and the indigenous banks are broke so are looking to claw back the freebies.

“There is this view,” Fitzgerald says, “that charges are going to be reintroduced across the board and all the banks are going to follow suit and if we as consumers passively accept that, then it will certainly happen. But if Bank of Ireland were to see large numbers of people switching they might have a re-think and if the other banks were to start picking up people moving from Bank of Ireland then they might think twice about introducing charges,” she said.

Shopping around when it comes to current accounts is simple as there are only five banks offering them in the Irish market: Bank of Ireland, Allied Irish Bank, Ulster Bank, the National Irish Bank and Permanent TSB.

To qualify for free banking with AIB you need to make a purchase using your AIB debit card and use AIB phone and internet banking to make a debit transaction every quarter. NIB offers free banking – for its basic current account services – with no restrictions. PTSB does not impose transaction charges but does have a quarterly flat fee of €12 which is waived if customers lodge at least €3,000 per quarter, make at least 18 card purchases, make at least one financial transaction through its online banking service and keep an account within agreed limits. And finally Ulster Bank, like NIB, has no charges for basic current account options.

So, on the face of it, the cheapest options are with NIB and Ulster Bank. While it may sound like a hassle, switching is fairly simple.

The Irish Banking Federation’s Switching Code means that all direct debits and standing orders have to be set up on the new account by the banks on the customer’s behalf.

But no matter where you go, free banking does not actually mean free at all. Banks have a whole raft of charges they apply to current account holders for one-off transactions. You can expect to pay handsomely if you need a duplicate bank statement, for example. NIB charges €4 a page – a whole lot more than it could possibly cost them to generate it. Ulster Bank customers who need a hard copy of a statement pay €3.81 for the first page and €2.54 for the second while it is €2.54 a page at AIB.

Replacing a lost or stolen Laser card costs €6 at the National Irish Bank and €1.25 for a new PIN number, while Bank of Ireland charges €5.90 for a new card.

It neatly sidestepped the fact that at least two other retail banks were able to maintain a current account service without imposing charges