Free banking for customers who keep their current accounts in credit is to be eliminated by Bank of Ireland next December. A spokeswoman for the bank has confirmed that from December free banking will "be gone".
It is understood that up to 45,000 current account customers, who up to now have enjoyed free banking by keeping a minimum balance of £100 in their accounts, will have to pay new transaction charges.
Customers who run their accounts in credit do not currently have to pay a "maintenance charge" or transaction charges to withdraw or lodge their own money. But all that is about to change. Only pensioners and students will retain free banking from next December.
Bank of Ireland presented the abolition of free banking as a "major restructuring of its personal current account". The bank's press release focused on the benefits to those who currently pay charges and "the abolition of 21 personal service charges". But the real story for people who operate their accounts in credit is the introduction of a new raft of charges.
If you previously enjoyed free banking, you will have to pay 22p per transaction. That will mean paying 22p to lodge a cheque, to withdraw money at an ATM machine, to lodge your salary, to use your Laser card, to effect each direct debit and standing order every month, and to transfer money between your own accounts.
With interest rates low and set to get even lower, having to pay charges to transfer your own money between your accounts could pretty much nullify whatever paltry interest your money is earning in a deposit account at the bank.
The bank says that customers can "opt" for a flat fee of £9 per quarter for 90 transactions and 22p per transaction thereafter. If you have more than 40 transactions per quarter, it will cost you more to "pay-as-you-go" than to pay the £9 flat fee option.
But if you select the wrong "option", you're stuck with it until the next quarter and you'll have to pay the higher charges in the meantime. If you "opted" to "pay-as-you-go" but had 75 transactions rather than 40, you'll have to pay £16.50 for that quarter instead of £9.
A spokeswoman for Bank of Ireland said that people who now enjoy "free banking" still have to pay certain charges: for example, to set up a direct debit, or when a standing order pays out from their account. She believes that even people who run their account in credit will benefit from the elimination of these service charges.
However, what the bank presents as a "benefit" in reality may, more often than not, prove to be nothing of the sort. Under the present system a customer with free banking might pay only minimal charges, perhaps an annual cheque card fee (£3.15) or to set up a direct debit (£2.70). That would be £5.85 in charges for the full year.
But under the new charging structure, if the same customer opts for the "flat fee" he will pay at least £36 a year or more if he exceeds 90 transactions per quarter or opted for payas-you-go but had more than 40 transactions in even one quarter.
The bank says customers want "simplicity rather than the myriad of charges and the confusion over what does or doesn't qualify as `free banking"'. But while those who currently pay charges naturally want simplicity, it is unlikely that anyone who enjoys free banking would trade it for a new raft of transaction charges in order to feel less confused.
Bank of Ireland says customers "want equity where all standard current account customers pay the same amount for the same service".
But customers with an overdraft avail of a service (an overdraft) which customers who run their account in credit do not need or use. In fact, the person with free banking gives the bank an interest-free loan (the minimum £100 qualifying balance for free banking).
Bank of Ireland says the new charging structure will cost the bank £5 million. But it will also be a net cost for no extra benefits to some 15 per cent of the bank's present customers who will, in effect, be subsidising the bank to pay for its new charging structure.
Perhaps the bank is relying on customer lethargy to prevent them voting with their credit balances and moving their accounts elsewhere.
Bank of Ireland knows customers could continue to enjoy free banking if they moved their accounts to AIB (so long as they keep a minimum balance of £100); the Ulster Bank (where they don't even have to keep a £100 minimum balance as long as they keep the account in credit); or National Irish Bank (where they also receive token interest on their credit balance).
