Is it time to break up with your bank? If you’re still paying current account fees in an era of free banking, it might be time to have the talk.
Once upon a time, a relationship with a bank was exclusive. Maybe you got together when you were younger, you trusted them with your salary and your savings, maybe you even took out a mortgage together. Your current account did the basics, such as paying the bills, receiving and dispensing cash, and offering access to a bit of foreign currency for your holidays.
But when a new generation of digital banks comes along offering current accounts that are free and full of snazzy features, what do you do? Do you stay loyal to your old fee-charging current account provider or do you ditch them for mostly free banking? Or is polyamorous personal banking the way to go, where you hang on to your “just in case” old branch bank while taking on a neobank too?
Fees
A number of new digital banks are now offering Irish customers current accounts with no monthly fees. Monzo, Revolut, Bunq and N26 do not charge a fixed maintenance charge for their basic accounts.
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These are financial technology or “fintech” companies so there are no branches; you bank exclusively through an app.
Revolut, Bunq and N26 are licensed by the Lithuanian, Dutch and German central banks respectively. Monzo is the first digital bank to secure a full European banking licence through the Central Bank of Ireland.
Monzo, Revolut and Bunq customers will have an Irish Iban. Deposits, as with all the neobanks here, are protected up to €100,000.
The absence of fixed current account maintenance charges are a big part of the neobank sales pitch. AIB-owned EBS is the only “bricks and mortar” bank here that doesn’t charge a fixed maintenance fee for its current account.
PTSB Explore current account customers pay an account maintenance fee of €96 a year – or €8 a month. Bank of Ireland, AIB and An Post customers pay €72 a year. Fees vary by credit union but can amount to between €48 and €60 a year.
If all your current account does is receive your salary and pay direct debits, it is likely time to question why you are shelling out the equivalent of six months of a streaming subscription for something that isn’t half as entertaining.
Cash is king?
The digital banks might offer free current account banking but there can be some limitations, depending on how you bank.
If you need physical cash regularly, the ease and cost of getting it is something to consider before ditching your old bank. The no branch/cash thing is one of the main reasons people who sign up to a neobank still keep some connection with a pillar bank on the side.
With the neobanks, you can use your physical or virtual debit card to pay at the till but, unlike AIB, Bank of Ireland, PTSB, EBS and a credit union current account, you can’t generally get cash back.
If you need a regular stream of fivers for birthday cards, bake sales and the tuck shop, that can be a pain.
You can take your neobank card to an ATM but withdrawals may come at a cost.
With a Revolut standard free account, you can withdraw up to €200 per rolling month, or five withdrawals, whichever comes first. Thereafter, you will be charged a fee of 2 per cent of anything withdrawn over those limits.
Monzo allows you withdraw up to €300 fee-free per rolling 30 days, with a 2.5 per cent charge on amounts withdrawn after that.
With a Bunq Free account, there is no monthly fee but ATM withdrawals will cost you €2.99 each. As physical cards are not included with this account, you’ll need to use an ATM supporting Apple Pay or Google Pay to withdraw cash.
An N26 standard account grants you two free euro withdrawals per month with a €2 per withdrawal fee after that.
Traditional Irish current account providers have long moved away from charging “per transaction” ATM fees for euro withdrawals, instead charging the flat monthly or quarterly account maintenance fee mentioned earlier.
The outlier is the An Post Money current account, where you’ll pay 60 cent for an ATM transaction.
Credit union current accounts offer five free ATM withdrawals per month within the euro zone, after which a 50 cent fee applies.
Cash and cheque deposits vary between neobanks. Monzo does not currently accept cash deposits, while Bunq supports cash deposits in Ireland through PaysafeCash, which entails generating a barcode in your app and scanning it at a participating local store.
Cheque handling remains much more limited than with traditional Irish banks.
So if you are opening a neobank current account, there is an argument for hanging on to your traditional current account too. But if that is your thinking, it makes sense to choose a traditional bank with low monthly fees, or none, such as EBS.
However, if you can’t remember the last time you handled cash or cheques, it seems time to question why you are paying daily banking fees with a traditional bank when a neobank could do the job for free.
Other fees to compare when assessing traditional and neobank current accounts are payment transaction fees and charges for non-euro transactions.
With a Revolut Standard account, for example, foreign currency exchange is fee-free within the plan’s €1,000 monthly exchange allowance on weekdays. A 1 per cent weekend exchange fee applies, and a 1 per cent fair-usage fee applies to amounts above the monthly allowance.
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Taking your Bank of Ireland or AIB debit card on holiday can be far more expensive.
Bank of Ireland charges 3.5 per cent, or a minimum of €3.17, for non-euro ATM withdrawals up to a maximum of €11.43, and 2 per cent on foreign currency purchases.
Withdrawing cash outside the euro zone using an AIB debit card incurs a 2.5 per cent currency conversion fee plus a 1 per cent cash withdrawal commission with a minimum of €2, and a maximum of €6.
Use your debit card to pay in foreign currency and you’ll pay 1.75 per cent of the euro value on purchases, or a minimum of 45 cent on the transaction and a maximum of €11.43.
Bells and whistles
Who knew your current account was not just a place for your salary to land and bills to leave? The neobanks offer more features than you can shake a stick at. Whether some of these are simply gimmicky or genuinely valuable is another story.
The neobanks can help you get more granular with your budgeting and saving. You can do things like track and analyse your spending, or automatically divide your income into different budget lines or pots. You can set spending limits on these budget lines and even split bills with friends.
Monzo’s “pots”, like Revolut’s “pockets”, Bunq’s “money pockets” and N26’s “spaces”, allow you separate your money into discrete subsections within your main account earmarked for specific expenses such as rent, bills or holidays.
This enables you to, in effect, hide a portion of your money from your current account balance so you don’t accidentally spend it with your debit card.
You can create multiple spending and savings pots, name them, stick a photo on each one if you like and instantly move money between them and your main balance.
You could have a pot for Christmas, summer holidays or car repairs for instance, so that when those bills hit, you will have squirrelled enough money into the respective pot over time to cover them.
When you have a current account with a bank, it’s handy to have some sort of instant access savings option alongside it. Some neobanks also offer an interest-earning savings feature in their current accounts.
Take the Instant Access Savings Pot available with Monzo’s free current account for example. On the money you keep in this pot, separated from your main current account balance, you can earn 2 per cent annual equivalent rate (AER) variable interest. Interest is applied monthly and tax is automatically deducted.
Bank of Ireland offers an Instant Access Demand account, which it says can be used as a money pot but is actually a separate demand deposit account linked to your profile, with its own separate bank account number, rather than just a virtual sub-balance inside your main current account.
It will earn a variable interest rate of just 0.1 per cent AER a year, with deposit interest retention tax (Dirt) at 33 per cent handled by the bank.
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Monzo’s app can split your salary automatically into your savings and spending pots. You can set savings goals and targets too and track your progress. You can even use a “lock pot” feature to stop yourself from withdrawing money until a specific date.
If you were to use all of the features available in some of these neobanks, it could turn managing the money in your current account into a second job.
Using the various pots could also see you stockpiling too much money in subsections of your current account when it could be earning a bit more interest elsewhere. Financial advisers might say it would be better and easier to put your money in one all-inclusive short-term savings account where it can earn the best interest available.
Rounding
Revolut, Bunq, N26 and Monzo current accounts also offer a feature called rounding. This allows you opt in to automatically save the change from every purchase. Do this and the next time you spend €4.50 on a coffee, the 50 cent spare change will automatically be added to your savings.
Bank of Ireland, AIB, PTSB and EBS do not currently offer any similar feature, though An Post does.
Again, is this a dinky feature that enables you to save effortlessly, or a bit of a pain? If you are watching the pennies and hoping you will have enough in the account to honour your direct debits, watching your current account balance whittle down even faster than your spending can be unsettling – even if those cents are being siphoned into your savings.
Instant payments
Instant payments were the entry point to neobanking for most Irish people. Revolut has amassed millions of customers here on the back of this feature.
Monzo offers instant transfers too, though the usefulness of this feature will be limited by how many Monzo customers there are in your network.
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There’s now Zippay too. That’s the instant payments system launched recently by the pillar banks – AIB, Bank of Ireland and PTSB.
The one big advantage for Zippay is that it’s in the app of these three banks, so it has potential to reach more than five million customers. And using it will spare them having to keep toggling to Revolut. Monzo will struggle to compete with Revolut and Zippay on instant payments.
Joint accounts
Being in a couple is where all these new current account options can get a bit messy.
If you have an account with a pillar bank and a neobank, and your partner has an account with a pillar bank and neobank, that’s four different current accounts.
If you are both maintaining a current account with a traditional bank, you could be paying up to €96 each a year each in account maintenance fees, or €192 between you. That’s a Netflix subscription right there.
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If you feel you need to hang on to a traditional bank current account for the sake of the odd cash withdrawal or lodgement, you’ll save some money by opting for a joint account here.
Like the main banks, all the neobanks offer free joint current accounts too.
If you do decide to change current account providers, there’s the matter of switching all your direct debits from one current account to another. Ask your new bank if they provide a switching service.
