AIB’s new current account fees - Midwest FM
AIB is set to charge its current account customers quarterly maintenance fees, including transaction fees for online and contactless card payments.
CEO of bonkers.ie, David Kerr spoke to Tommy Marren on Midwest FM about the new account fees and how customers can switch and save to avoid being charged.
Here’s an outline of the main points discussed by David in the interview.
What changes is AIB making?
Two things that are changing for AIB current account customers:
- The waiver limit after which you won’t be charged any fees whatsoever is being eradicated. It used to be the case that if an AIB current account customer maintained €2,500 or more, they wouldn’t be charged any fees at all.
- AIB is introducing a fee for contactless transactions for the first time. The bank will now charge 1 cent per contactless transaction. It's not the first to do this, as Ulster Bank and Bank of Ireland already implemented this.
Why are these changes occurring?
Banks are in a difficult situation in terms of profitability. There’s increased competition with fintech digital banks.
Traditional banks are now looking for ways to charge customers for services they’re availing of.
For customers that have been loyal and have a lot of services with the banks, they’re now not being rewarded whatsoever.
Your current account is the centre of your financial life. It’s where you get your salary paid and it’s where you pay your bills from. The banks know this and they know you’re going to be doing a number of transactions.
The changes will add around €80 per year in fees for customers.
When are these changes coming into force?
The changes are due to come into force at the end of May.
What about the older generation?
Older people like having bricks and mortar stores that they can go into. They may be wary of this digital economy.
Customers over the age of 66 can still avail of free banking from AIB, despite these new changes.
If they do go into a bank though, there may be a fee for some bank transactions.
Savings account interest rates
We’re in a very low-interest rate environment at the moment. The European Central Bank rate being negative right now is going to be the driver.
On the positive side, mortgage rates are being reduced slightly, but on the negative side, there’s no money to be earned on your savings at all.
A cashless society
Some countries, such as Sweden, are discouraging the use of cash throughout all public services.
There’s more security to be had in a digital transaction than a physical transaction. With Covid-19, cashless transactions are also seen as safer. There’s far less currency in circulation because people are using it less in favour of digital transactions.
As well as this, branch networks are reducing and banks are closing down branches. People don’t need to go into banks anymore. Bank branches are mainly there now for small businesses.
Even with the new charges, it’s still cheaper to use contactless transactions than to use cash, due to the cost of ATM withdrawals.
Digital bank accounts
With the apps from these ‘digital only’ banks, it’s really easy to send money from one person to the other.
All of the banking is done through an app, which is what younger people want.
The fear of switching current accounts
Current accounts are the most loyal product a bank has.
Banks spend a lot of time and effort in schools and universities trying to attract new customers. When you go to a particular bank for your current account, you’ll likely stay there for decades and not leave.
People have an irrational fear of switching bank accounts and they think that if they switch, their salary won’t arrive in their new bank account.
The current account switching code
The banks have an agreement that when a customer wants to transition from one bank to another for their current account, the bank you’re moving to will help you transition all of your direct debits and your salary to your new account.
You can transition over time by opening a current account and slowly migrate over to the new account.
A lot of people use ‘digital only’ banks as secondary bank accounts and are slowly transitioning over to using them as their main account.
Compare current accounts on bonkers.ie
Are you an AIB customer? What do you think of the new charges? If you’re not happy, you should consider switching current accounts.
Before making the switch, you might want to take a look at some of the following:
- You can consult our guide on how to switch current accounts to learn more about the steps involved in the switching process.
- Take a look at the recent piece we wrote on who is offering the best value current accounts at the moment or listen to our bonkers.ie podcast episode where we take a deep dive into current accounts.
- If you like the sound of a digital bank, check out our comparison on N26 versus Revolut for a comprehensive review of both or listen to our podcast episode on the digital banks here.