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20/10/2021

Making Cents: The good, the bad and the ugly of current accounts

Making Cents: The good, the bad and the ugly of current accounts

There are about 5.3m current accounts in Ireland, and it’s always a bugbear of a topic for people, especially when they see banks increasing their charges so frequently. That extra cent or two to lodge or withdraw money, that quarterly bill that lands in our account is incredibly annoying.

But despite our irritation, the rate at which we switch is incredibly low.

The most recent data available shows that only 0.00029% of current account holders actually moved providers over a calendar year.

And banks are very aware of this. They know people are less likely to switch their current account than any other banking product which is why they can increase their charges. They know, the % that will move will be minuscule. They know we’ll complain, and we’ll be outraged, but a week or two after the increase, it will be old news and we’ll have done nothing about it.

The main motivators for switching, I think are, those push factors, i.e. when you feel let down by your current provider, rather than the pull factors such as lower fees offered by other providers. And perhaps we don’t move because we simply don’t value the savings we’d achieve for the time and effort we’d have to spend in setting up a new account, or we don’t see much of a difference between providers, or it’s, a hassle notifying your employer or anyone else who lodges money into your account, such as social welfare, that you are switching banks and you have to give them your new account details to make sure you’re paid, or we might worry that direct debits will be unpaid in the changeover process.

Current accounts are often referred to as pay-cheque hotels i.e. a temporary place where your money stays for a short period of time before it moves to other places. The reason for this is known as deposit displacement, where you divert funds from current accounts to other accounts like a savings or deposit account, a pension, or on-line digital banks. And because money can be transferred between banks with ease, people are happy to maintain the status quo with their current account and divert money from it to other providers who might offer higher interest rates, better incentives and so on. But they don’t have to move lock stock and barrel in order to achieve this, which means people don’t close accounts, they just add new ones.

Look, I’m sure there are many more reason’s, but regardless I thought it was a good time to put the various providers alongside each other, so you could carry out your own due diligence and see what the differences are. Maybe, the reason you haven’t considered moving is because you don’t know what other providers are offering, and if that’s the case, this will help.

Bank of Ireland

They have an annual charge of €72 which comes in the form of a monthly €6 fee.

This monthly fee came into effect in November ’20 and replaces the 26 different charges that existed and were charged before then.

Previously, if you maintained a balance of at least €3,000 in a current account for a whole quarter you’d avoid any transaction fees, but you’d still incur a quarterly fee of €5. But with this new fee structure, even if you maintain a balance greater than €3,000, you’ll see your annual fee rise from €20 to €72, which is an increase of 360%.

AIB

They charge an admin fee of €4.50 per quarter or €18 per year, but they also charge for specific transactions, like direct debit/standing orders at 20c, cheque lodgements/written at 39c, transactions in branch 39c, machine lodgements 35c, ATM withdrawal 35c, debit card transaction 20c, internet of phone transaction 20c.

EBS

With their monthly manager account, they don’t currently charge any quarterly admin fees or transaction fees. They don’t have a minimum monthly lodgement requirement either and it’s a good account if your usage and requirements from a current account are low i.e. you don’t want a cheque book or overdraft and you don’t need access to Google or Apple Pay.

PTSB

Their Explore Account has a monthly maintenance fee of €6 but you can reduce this by €5 depending on your usage.

The account has a cashback facility where they will pay account holders 10 cent for every debit card purchase, including point of sale transactions and online shopping, up to a maximum of €5 a month.

So, if you make 50 debit card transactions every month, the monthly maintenance charge effectively reduces to €1.

The account also offers cashback on certain bills that are paid by direct debit and 2% cashback on monthly mortgage repayments, once the mortgage is with PTSB and paid from the Explore Account.

Ulster Bank

They charge a monthly maintenance fee of €2 which cannot be avoided, regardless of how much is maintained in your account.

However, if you keep €3,000 in your account at all times, you can avail of free transactions. If you don’t, they will apply fees such as ATM withdrawals 35c, cheque processing 80c, debit card transaction 20c, contactless 1c, over the counter and in-branch machine transactions 80c, internet, direct debit and standing orders 20c.

KBC

If you lodge a minimum of €2,000 to their EXTRA current account, you will avoid all admin and transaction fees.

If you don’t, you will be charged a €6 per quarter maintenance fee, and transaction fees of 30c for each ATM transaction and 30c per cheque lodged in the quarter.

This account also offers lower mortgage interest rates if your mortgage is with KBC and is debited from your current account, a reduced rate on their personal loans, and discounts on home insurance policies whether they are new or being renewed.

N26

They have no admin fees on their current account.

The only transaction fee is applied on Irish ATM withdrawals. And if you use them more than 5 times in a month, the fee charged, each time is €2.

An Post

They have a €5 monthly maintenance fee on their Smart Account which covers contactless payments, direct debits, mini statements, one cash withdrawal per week at a post office, online purchases, online transfers and point-of-sale transactions.

They charge 60c for ATM withdrawals, which reduces to 50c if the money is taken out from a branch, and there's also a 50c charge for any cash or cheque lodgements at a Post Office branch as well.

Like PTSB, An Post offer customers the opportunity to earn cashback rewards ranging from 5% to 10% if you but from one of their preferred providers. So, you could get 5% back on the cost of a burger if you buy from a particular outlet, 5% off your next holiday, 5% off some on-line purchases, 10% off energy bills etc.

Credit Union

They have a monthly maintenance fee of €4 which is charged to your account every quarter.

If offers five free ATM withdrawals per month, after which 50c is charged per withdrawal. All other day to day transactions, are free. If you use the card for spending outside the Eurozone there is a 2% charge, capped at €12.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or harmonics.ie

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