Lifting the lid on the banks' top 60 tricks
We've been hit by sneaky charges and interest rate hikes since the recession began -- and there's more to come, writes Louise McBride
WHEN flying our tricolours on Paddy's Day two years ago, little did we know that it would be only a matter of months before Ireland would sink into its worst recession in 25 years.
Back then, banks were falling over each other to offer the cheap mortgages and credit cards that would entice us through their doors. Those days have long gone. Since Paddy's Day 2008, we've been hit with hundreds of interest rate hikes and sneaky bank charges -- and there are more to come.
The Sunday Independent uncovered some of the 60 worst charges and rate hikes of the past two years.
CREDIT CARD CHILLS
Banks were once so desperate to poach credit card customers from rivals that they were prepared to take on a bill you had run up on another credit card -- and not charge interest.
Known as interest-free balance transfers, these offers allowed you to transfer a credit card bill to another provider without paying any interest for a few months. In September 2008, Ulster Bank had a nine-month interest-free balance transfer offer on its credit cards -- this was pulled in January 2009. National Irish Bank withdrew its five-month interest-free offer in June 2009. On Wednesday, Bank of Ireland (BoI) will quash the six-month interest-free offer on its Clear and 2-in-1 credit cards, while the interest charged on 12-month balance transfers to its Platinum Advantage card will rise from 2.9 per cent to 3.9 per cent.
BoI will introduce 10 interest-rate hikes on various credit cards this June. The interest charged on credit card purchases on its Clear card will increase from 9.5 per cent to 10.9 per cent, while the interest on cash withdrawals will rise from 19.9 per cent to 23.2 per cent. Students will pay 23.2 per cent interest on cash withdrawn on BoI's Student credit card, about 25 per cent more than they pay now.
One of the biggest upcoming BoI hikes is on its Platinum Advantage card -- from June, you'll pay 23.2 per cent instead of 16.5 per cent interest to withdraw cash with this card. So if you withdraw €1,000 cash on Platinum Advantage, and you don't manage to clear any of that bill within a year, you'll pay about €258 in interest instead of €178, according to Ronan Coburn, forensic accountant with the financial consultants The Bottom Line. That's almost 50 per cent more interest.
AIB will increase its credit card interest rates from May 11, when holders of its Click, Platinum and low interest MasterCard will pay more interest.
National Irish Bank (NIB) and Permanent TSB have increased their credit card interest rates over the past two years, while BoI, Permo and Ulster Bank have upped credit card charges. In October 2008, BoI hit Platinum Advantage card holders with a late-payment fee of €7.50 when they failed to pay a bill on time. That fee hadn't been charged before. Two months later, Permo imposed a similar fee for its Ice card. Ulster Bank has more than doubled, from €3 to €7, its unpaid item fee, charged when you don't have enough in your account to clear a credit card transaction.
At least 8 scary hikes
Tracker mortgages, where the interest on your mortgage is a margin above the ECB rate, had disappeared from the market by the end of 2008 as lenders could no longer afford to offer them.
The mortgage interest rates being offered to first-time buyers today charge margins of up to four times what they were two years ago. Permo and Ulster Bank are among the worst offenders. In May 2008, a first-time buyer borrowing €300,000 could have snatched a tracker mortgage from Permo with an interest rate that was 0.75 percentage points above the ECB rate. Today, the borrower would be lucky to get a mortgage interest rate that is 3 per cent above the ECB rate. The borrower could have received a tracker rate from Ulster Bank with a margin of 1.15 per cent above the ECB in May 2008 -- today Ulster could charge a rate with a margin of 3 per cent over the ECB. The interest rate margins charged on AIB, BoI, EBS and NIB mortgages dwarf those charged when tracker mortgages were available.
The interest charged on equity release loans, where home-owners borrow money based on the value built up in their homes, has also increased over the past two years. In May 2008, Permo had a 10-year fixed rate of 5.7 per cent on these loans; today the rate is 6.1 per cent. Permo's five-year fixed rate on equity release has increased from 5.5 per cent to 5.75 per cent.
At least 10 hikes
If you withdraw more from your current account than you have in it, you could be hit with interest rates that are almost as bad as those charged on credit cards.
Last month, BoI increased the interest rate charged on four of its overdrafts. The interest charged on its student overdraft rose from 10.8 per cent to 11.9 per cent, while the interest on its graduate overdraft rose from 8.7 per cent to 9.7 per cent. The interest charged on BoI's personal overdrafts rose from 13.7 per cent to 14.8 per cent, or from 12.3 per cent to 13.4 per cent (depending on the type of overdraft). Even those who don't go into the red won't be spared. If you've a credit balance of up to €1,500 in your current account, BoI currently pays 0.75 per cent interest. From the end of April, you'll only earn a third of this.
Current account customers have been hit with a raft of hefty charges. In March 2008, AIB increased its charges for bounced cheques, or where there were not enough funds in an account to cover a direct debit or standing order. The charges -- unpaid outgoing item charges -- rose from €6.35 to €10 for personal customers, and from €7.50 to €10 for business customers. In August 2008, Permo more than doubled these charges for personal and business customers, from €4.44 to €10.
At least 8 hikes
The interest charged on many personal loans has exploded over the last two years. In July 2009, you could have borrowed €10,000 from AIB at a rate of 9.14 per cent. Today, you're charged 11.35 per cent, or about 25 per cent more. If you have a ufirst account with Ulster Bank and take out a personal loan of €10,000, you'll pay interest of 10.5 per cent today, compared to 9.3 per cent in November 2008. The interest rate on loans of €15,000 or €20,000 has increased from 7.7 per cent to 9.9 per cent. Most other lenders charge more for personal loans than they did two years ago. BoI charged 12.4 per cent interest on its term loans early last month -- this has increased to 13.5 per cent.
WORSE TO COME
Mr Coburn said: "The banks need to stem their loan losses fast before they can even return to profitability. The way they will achieve this is by applying substantial increases on their tariffs across the board."
If you live beyond your means, be on high alert. "It is the customers who go into the red that are more likely to get hit with higher charges," said Eddie Fitzpatrick, director of the financial watchdog BankCheck.