Students get inducements, but the rest of us pay for the privilege, says John Hearne
NEW research has shown that we've no idea how much we're paying in current account charges.
The reality, however, is that if you bank with either AIB or Bank of Ireland, you're probably shelling out around €120 per year.
Back in the good times, the banks fell over themselves trying to entice us in, but since the crash they're taking full advantage of consumer inertia. No matter how badly they treat us, we keep coming back for more.
A new survey from research company Amarach and Permanent TSB finds that part of the problem is that we have no idea just how much banking services cost. Some 80% of consumers under-estimate their banking bill by 50%. "Right now though, depending on the bank you're with, you could be paying 35 cent Bank charges whenever you take cash from an ATM, 40 cent to talk to a teller, or 20 cent each time you buy stuff with your debit card." So says Simon Moynihan of price comparison site, Bonkers.ie. He points out too that there are maintenance fees on top of these charges.
They all creep up so stealthily, it's no wonder we're unaware of just how much we're paying. People only tend to switch, he believes, for two reasons.
"The first is a forced event," he says. Witness the sudden spike in switching activity at the start of the year, as 60,000 Danske customers were cut loose by the bank after it exited the retail market.
Since then, switching activity has fallen way back.
"The second motivating factor," says Moynihan, "is plain, old fashioned, giving away cash." Believe it or not, one bank in the market is doing just that right now.
The only thing is, to take advantage you've got to be a student. The bank that's down with the kids is KBC.
This from their website: "All 3rd level students can grab themselves €100 just by signing up for and using a KBC student current account. Getting €100 from KBC is easier than waking up for your 9am lecture...Nice One!" You get €50 up front when you open an account, and if you rack up ten transactions on your debit card before the end of the year, you get the second €50.
Retail banking has, of course, been through the wringer in the past decade.
Last year alone, ACC Bank and Danske Bank pulled out. The KBC student initiative might give the impression that there's a little competition returning to the market but in reality, the offer is a simple recognition of the inertia confirmed by the Amarach/PTSB survey.
"The banks recognise," says Simon Moynihan, "that if they sign you up as a student, they've probably got you for life, so a hundred quid now is a very good investment." Since the reintroduction of fees, value is a scarce commodity in the banking sector. But it is there if you look. Moynihan identifies three tiers in current account banking. The first, and best, he calls 'low fee, low waiver' banking. It consists of one bank, and one bank only. Permanent TSB— who unsurprisingly bankrolled that switching survey — doesn't charge transaction fees, while their maintenance fees stand at€4 per month, levied quarterly. So the most you'll pay if you bank with PTSB is €48.
If, however, you make lodgements amounting to €1,500 into your account every month, all fees are waived. "If you're working full time, you should be able to meet the waiver at PTSB," says Moynihan.
The second tier is comprised of banks whose waiver conditions are hard to meet, but whose charges are not that high. KBC, for ex- ample, charge €6 per quarter management fees, though their ATM fee is towards the top of the scale at 30c.
The only way to avoid fees is to keep €2,000 in your account at all times, a condition which will be impossible for many people.
Ulster Bank charges €4 a month transaction fees. Up until today, you had two ways of dodging that fee, the first by lodging a total of €3,000 into your account every month, the second by maintaining a cleared balance of at least €3,000.
As of today, however, that first waiver is gone, indicating that far from improving, the retail environment for banking customers remains as uninviting as ever. Then we have the hardcore, the third tier, which is banks with high fees that are very difficult to avoid.
If you bank with AIB, you now have to maintain a minimum balance of €2,500 in the account in order to avoid being charged fees. With Bank of Ireland, the figure is €3,000.
"The nuts and bolts of it," says Moynihan, "is that unless you have a spare €2,500 to €3,000 on you that you can leave sitting in a current account at all times, an average customer will pay between €100 and €120 per year in bank charges." In other words, if you can afford fees, you won't have to pay them but if you can't, you will.