Sunday 28 May 2017

Prepare for higher charges as banks tighten the screw

From mortgage fees to paying for ATM withdrawals, new charges could hammer the public, writes Louise McBride

Pay up: Free ATM withdrawals may not last much longer
Pay up: Free ATM withdrawals may not last much longer

THE Irish taxpayers -- who have already coughed up billions to bail out the Irish banks -- should brace themselves for a new raft of bank charges.

In a desperate attempt to beef up their balance sheets, banks have increased their credit card and overdraft charges, as well as the interest rates on their personal loans and mortgages, over the last couple of years. As Irish banks could yet need another €25bn -- on top of the €35bn they're getting under the EU-IMF deal -- to cover their losses, more vicious bank charges could be on the way.

ATM CHARGES

If Irish banks follow their German and French counterparts, the days of using the ATM of a bank of which you are not a customer could be numbered -- unless you want to pay sky-high charges.

Last year, you could have paid as much as €7.50 each time you took money out of an ATM in Germany, according to Johannes Kleis, spokesman for the European Consumers' Organisation.

"Charges have come down since then but the charges of German savings banks -- who have the highest number of cashpoints -- are still very high," said Kleis.

In France, the cost of cash withdrawals from the ATMs for non-customers has increased by 63 per cent over the last six years, according to a recent study by the French consumer association, UFC-Que Choisir.

In Ireland, most of us can avoid paying ATM charges if we keep a certain amount of money in our current account -- or get our salary paid into the account.

Experts, however, believe that it will soon become impossible to avoid ATM charges in Ireland -- and that the charges will be a lot higher than the 20c or 28c fees currently lobbed at some customers.

"ATM charges are very likely to appear since almost everyone aged 18 and over has an ATM card -- so the target market is large," says Ronan Coburn, a forensic accountant and banking consultant with The Bottom Line.

"This will initially be introduced at a low level to test consumer tolerance (or resistance). But within the next three years or so, it will be a vast source of super-normal profitability for the banks."

Irish banks could easily decide to follow France and Germany and introduce two ATM charges -- one for its own customers and a higher charge for customers of other banks.

CASH-HANDLING FEES

Most businesses pay a charge every time they lodge or withdraw money into their business account. If you lodge money into or withdraw money from a business account with Bank of Ireland, for example, the cash handling fee is 0.48 per cent of the amount lodged or withdrawn (up to a maximum charge of 48c per €100).

It is only a matter of time before banks charge cash-handling fees on personal accounts, warns David McCarthy, managing director of the financial consultants McCarthy & Associates.

"We could have a situation where we're charged for withdrawing cash from our accounts," he says. "If that happens, banks could introduce a two-tier system where the charges are higher for over-the-counter withdrawals than they are for automated withdrawals. Banks don't want us in their branches, so paper transactions will become more expensive."

PHOTOCOPIES AND PIN numbers

Next time you've got an appointment with your bank and you ask them to photocopy your bank statements or house deeds, check that you're not going to get charged for the service. If Irish banks follow in the footsteps of the French, it could only be a matter of time before this happens.

Back in 2004, it was free to photocopy documents at French banks and to store documents there -- but many banks have since started to charge for these services, according to UFC-Que Choisir, which offers advice to consumers.

UFC-Que Choisir also found that many French banks had increased the cost of basic services over the last few years, such as credit cards, international bank cards, new PINs for bank cards that have been lost or stolen and charges for withdrawing cash from foreign banks while abroad.

Ronan Coburn believes Irish banks are likely to follow suit -- particularly for customers using bank or credit cards outside the EU to buy something or withdraw cash. You are usually charged a cross-border transaction fee of between 3 and 3.5 per cent of the amount withdrawn if you are outside the EU and withdraw cash.

If you're using a debit card to buy something outside the EU, the fee is generally about 1.75 per cent of the value of the item. These charges will also kick in if you buy something on the internet outside the EU.

"Currency conversions for transactions outside of the EU will be stepped up," says Coburn. "Cross-border transaction fees could be doubled or trebled."

SLEEPY ACCOUNTS

If you lived in France for a while and have since returned home, be sure to close any bank account you opened over there. Some French banks charge a fee of as much as €123 if you have an account with them which has not had any money lodged into it or withdrawn from it for a long time, according to UFC-Que Choisir. Irish banks are already moving in this direction with current accounts.

If you have a current account with Bank of Ireland, for example, you lose free banking if you don't have at least €3,000 going into your current account and make nine debit payments from your account using BoI's phone or online banking every three months.

Alternatively, if you keep a minimum credit balance of €3,000 in your BoI account every three months, then you can avoid fees. If you don't qualify for free banking with BoI, you either pay 28c for every transaction into or out of your account -- or a flat fee of €11.40 every three months.

If you have an Everyday current account with Permanent TSB, some of the things you must do to qualify for free banking include making 18 purchases with your Visa Debit card every three months and lodging at least €3,000 into your account every three months.

Otherwise, you're hit with a €12 fee every three months -- which adds up to a whopping €48 a year.

If Irish banks follow the French, they might also lob a flat charge of more than €100 on your account if you don't use it for some time. Savings accounts might even be targets.

MORTGAGE ARRANGEMENT FEES

In recent years, subprime lenders charged arrangement fees of as much as 1 per cent of the mortgage. Mainstream lenders have steered clear of mortgage arrangement fees for the past 15 years -- but these fees could be about to make a vicious comeback, says Coburn.

He believes that lenders could charge arrangement fees of as much as 1.75 per cent. If he's right, you could be hit with a whopping €3,500 fee if borrowing €200,000 -- or a €5,250 fee if borrowing €300,000.

"The current restricted lending climate is such that waiving of such fees no longer occurs, since the vigorous competition for good lending propositions is now gone for a long time," said Coburn. "Loans for new mortgages are down to a trickle, so if and when these charges reappear, they are likely to be increased very substantially and levied on the few borrowers who overcome the mortgage-approval hurdle.

"Banks will expect to get away with these charges because people who receive mortgage approval today are rare and, some believe, privileged. They are most likely getting a good deal in a depressed housing market and won't argue with the bank when it imposes an arrangement fee of 1.75 per cent."

DAILY OVERDRAFT CHARGES

Some British banks charge daily fees for every day you are in an unauthorised overdraft. Halifax, for instance, has a fixed charge of stg£1 a day on arranged overdrafts of up to £2,500. The charge is £5 a day if the overdraft is unauthorised.

In Ireland, you are charged interest if you go overdrawn -- and you may also pay an annual fee to have an overdraft arrangement in place. But Irish banks could also quite easily decide to impose a daily fee on customers who are overdrawn.

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