Now banks could start charging us for saving our money with them
Published 20/08/2016 | 02:30
Banks could start charging customers to save with them, it is feared, amid record low interest rates.
A move by Bank of Ireland to start charging corporate customers for deposits has prompted concerns that banks may also charge consumers for saving with them.
Already a number of banks are paying close to 0pc for consumers on demand deposit accounts - savings products where you can get your money back without giving any notice to the bank.
And in a shock move, Bank of Ireland is to charge corporate customers with more than €10m on deposit an interest rate of 0.1pc from October.
This will mean a big corporate will be charged €10,000 a year for a €10m deposit.
The move comes months after the European Central Bank (ECB) rate hit 0pc, and ECB later told banks it would charge them 0.4pc to hold their cash overnight.
The Bank of Ireland move means companies will have to pay it to put money on deposit with it. It follows similar action by Ulster Bank.
But both AIB and Permanent TSB say they have no plans to charge for deposits at this point.
Asked if it was about to introduce negative interest rates for consumers, Bank of Ireland said: "We have no plans on the consumer side."
Managing director of price comparison site Bonkers.ie David Kerr said banks have been slashing interest rates paid to consumers for years.
"Interest rates for personal banking customers have been falling for some time, with the best rates available for a regular saver standing at around 3pc. To make matters worse for customers, Dirt (deposit interest retention tax) has been increasing over recent years and now stands at 41pc."
Despite the slide towards negative interest rates, Mr Kerr believes banks will be very reluctant to cross the line to charge consumers for deposits.
"Irish banks and their customers already have quite a fraught relationship at the moment, with memories of the banking collapse still fresh in many minds.
"Because of this, banks will be very reluctant to introduce negative interest rates and begin charging Irish customers for the privilege of keeping their hard-earned cash on deposit."
Finance expert Frank Conway said banks will only introduce negative interest rates for large corporate customers, and not for consumers.
He explained the unprecedented move to charge depositors: "Money is just too expensive to hold these days.
"And the reason is the extraordinary interest rate environment where banks are facing higher costs, through negative interest rates and higher regulatory requirements, which means that it is now really expensive to hold money."
He added that retail customers are unlikely to be charged directly. But most consumers must keep minimum balances on deposit with banks in their current accounts to avoid a range of fees which the banks had put in place since the credit crisis of 2008. Most older customers get fee-free current accounts.
Mr Conway warned that deposit rates will continue to fall.