How to cut your current account fees
Banks have gradually tightened up access to fee-free banking, with customers now having to jump through hoops to avoid charges on day-to-day banking transactions. However, with most banks, it is still possible to escape fees by managing your account carefully. Here is how to avoid current account fees.
**AIB:** Use your AIB debit card to make a purchase each quarter, and make a debit transaction using AIB Phone or Internet Banking (such as topping up your mobile). AIB recently announced changes to its policy on current account fees. From May 28, customers must maintain a credit balance of €2,500 to qualify for free banking.
**Bank of Ireland:** Over the fee quarter, lodge minimum €3,000 to your personal current account, and make 9 debits using Banking 365 Phone/Online or, throughout the fee quarter, maintain a minimum credit balance of €3,000 in your personal current account.
**National Irish Bank:** Earlier this year, the bank announced a number of changes to its personal current account product range, marking the end of fee free banking. Customers now have choice of three daily banking packages; 24/7, Easy Plus and Prestige. Annual fees of €20, €75 and €125 respectively apply.
**Permanent TSB:** To avoid the account maintenance fee for the bank's Everyday Bank account, lodge at least €3,000 to your account each quarter, make 18 card purchases on your account each quarter, and make one financial transaction via Open24 telephone and internet banking. The account must also be kept within agreed limits. For example, if you exceed your authorised overdraft, you'll be charged the account maintenance fee.
**Ulster Bank:** Standard current account does not charge fees for regular day-to-day transactions, but the bank also offers "extra benefit accounts" which do apply monthly charges but also offer benefits such as insurance cover and discounts.
Down through the years, banks have complained that the current account was a loss leader. But by offering and maintaining this service, banks viewed it as a mechanism to springboard other selling opportunities in services and products to their customers. And as long as those opportunities materialised into concrete sales, the current account was a primary service on offer.
Most people end up paying €120 a year to their bank for operating a current account, according to Central Bank research published last December. One bank has a 32-page booklet on its current account schedule of fees and charges. The fees are higher in Ireland for those who avoid going into the red than they are in Britain and the North.
More than nine out of ten bank customers in Britain and the North manage to keep their annual current account fees below €50. But just six out of ten customers of AIB, Bank of Ireland, Ulster Bank, Permanent TSB and National Irish Bank used their current account in a way that keeps day-to-day transactions charges under €50 a year. The Central Bank's research found that the highest bank charges are imposed on people who end up with an unauthorised overdraft situation.
Surcharge interest rates of up to 12 per cent on top of the overdraft interest rate (Bank of Ireland's overdraft rate is 15.9 per cent) are imposed on unapproved overdrafts, while fees of up to €12.70 are also levied when a cheque or a standing order has to be returned unpaid. For a bank official to check and approve the overdrawing of your current account, a charge known as the referral fee (about €4.44 a day) is also applied.
This is a little like going into your local supermarket, taking a tin of beans and walking out without paying or asking, except "overdrawing" your account - withdrawing money that is not yours - is allowed by the banks on occasions, but you pay dearly for it.
So what are the alternatives to the current account ? As we march relentlessly towards a cashless, technology-driven society, what options are there for the ordinary person in the street? You could keep cash at home and place specific amounts for specific bills into envelopes and when bills are due, bring the envelopes to the supplier directly or to a post office where you can make payments through their free BillPay service. Keeping cash at home, however, has its security issues.
You could also lodge money into a prepaid MasterCard or debit card and pay the supplier directly or online.
Another solution is An Post's online service which processes almost 25 million bill payment transactions through its network of 1,150 post offices throughout the country and online. While open six days a week with considerably longer hours than the banks, its online services, in particular mybills.ie are eye catching.
Already 50,000 consumers have signed up for this unique, free online service that allows customers to take control and manage their household bills online and totally securely.
Payments are simple and flexible with the facility to pay more than one bill at a time.
The consumer chooses exactly how much to pay off a bill at a time that's convenient to them and best suits their finances, enabling them to pay more than 100 household bills online easily and at no extra cost, including Electric Ireland, Bord Gáis and Eircom.
Consumers can also track their outgoings and manage the household budget by viewing reports and graphs of their bill payment history, confidentially and free of charge.
*John Lowe, fellow of the Institute of Bankers, is founder and managing director of Money Doctor, regulated by the Financial Regulator and author of the best-selling The Money Doctor Finance Annual 2012 plus 50 Ways to Wealth. Email email@example.com or firstname.lastname@example.org or call 01-2785555.*
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