TOMORROW marks the fifth anniversary of the bank guarantee. The banks appear to be getting back on their feet. Some even expect to make a profit next year. Let's wait and see.
One thing that's certain is that the banks have been milking us for extra charges and hefty interest since the bank guarantee kicked in five years ago. That's some payback for the €63bn of taxpayers' money that was used to prop up the banks since then.
So just how bad a deal are you getting from your bank today than you did before the bank guarantee?
THEY'VE DOUBLED CREDIT CARD INTEREST...
Before the crisis kicked in, banks were falling over themselves trying to win over credit card customers. In 2007 for example, Halifax Ireland, which has since shut up shop, paid you €100 if you switched your credit card to the bank.
It is now much harder to get a credit card – and banks have also cranked up the interest charged on credit cards. AIB and Ulster Bank have the most expensive credit cards today – some of their cards charge 22.7 per cent interest on card purchases (when you use your card to buy something).
Permanent TSB has almost doubled the interest rate on its Ice card over the last five years. In October 2008, the interest rate on the Ice card was 9.9 per cent. Today, you're charged 17.3 per cent interest on card purchases.
Such a hike in interest rates will hit anyone struggling to repay a credit card bill hard. If you owe €1,000 on your Ice credit card for example, and pay €30 off the bill a month, it will take you three years and 10 months to clear your bill today. Under the 9.9 per cent interest rate charged back in 2008, it would have taken you six months less to repay the bill – saving you €180 in interest.
Clearly the more expensive your card, the longer it will take to repay your bill. Since 2008, Ulster Bank has increased the interest charged on purchases made with its Classic Master Card by more than a quarter. If you have a Classic card, under today's whopping interest rate of 22.7 per cent, it would take you four-and-a-half years to repay a €1,000 bill at €30 a month.
If you were paying back the same bill under the interest rate charged on the card in October 2008, you would have cleared your bill seven months earlier – and saved €210 in interest.
...BUT HALVED YOUR SAVINGS INTEREST
Most banks are paying less than half the interest on savings accounts today than they did a few months before the bank guarantee kicked in.
For example, back in July 2008 AIB paid 7.5 per cent interest on its regular savings account. Today it is only paying 2.85 per cent interest on the same account. If you put a €10,000 lump sum into AIB's Online Notice 7 Account in July 2008, the bank paid 5.25 per cent interest on your savings – today you'll only earn 2 per cent interest. So if you've got a €10,000 lump sum in AIB's Online Notice 7 Account, you're getting €336 less interest a year today than you did in 2008.
It's a similar story at the other banks. For example, in June 2008, Bank of Ireland paid 5.26 per cent interest a year on savings of €3,000 or more lodged to its 18-month term deposit account. Today, the best rate you'll get if you tie up your savings for between nine months and two years with the Bank of Ireland is 2 per cent.
In summer 2008, Permanent TSB's 10:10:20 account paid 5.89 per cent interest a year on lump sums of €10,000 or more left in the account for 20 months. That account has since been pulled and the best rate you'll get at the bank on a €10,000 lump sum today is 2.5 per cent.
"Savings interest has taken a beating since the bank guarantee, with rates tumbling across all institutions," says Simon Moynihan, communications director with the personal finance website bonkers.ie.
The amount of tax you pay on savings interest has also increased since 2008. Five years ago, you paid 20 per cent DIRT (Deposit Interest Retention Tax) on any interest you earned on savings – the Government has hiked the DIRT rate to 33 per cent since.
THEY'VE TAKEN AWAY FREE BANKING...
No-strings free banking was pretty much a given in any bank in 2008. Many banks were still paying interest on your current account – as long as you had not gone into the red.
Some of the interest paid on current accounts was even as good as that paid on some savings accounts. In July 2008 for example, AIB paid 4.25 per cent interest on its high-interest current account as long as you lodged a certain amount of money into that account each month.
Those days are long gone, however.
"Since the guarantee, we have seen the range of current accounts seriously curtailed and true free banking disappear altogether," said Moynihan. "Customers, who were used to free current accounts, are now being asked to pay fees across all the big banks – unless they can meet waivers which are out of the reach of most customers."
You'll pay between €18 and €168 a year for a current account today, depending on your bank – and the type of account you have. "A fee of €100 or more a year to maintain a current account is too much," says Moynihan.
You can generally avoid account maintenance fees if you lodge a certain amount of money into your account each month – or keep the balance in your account above a certain level. However, doing so means you lose out on the interest you could have earned by lodging that money into a savings account.
Some banks have also started to charge account maintenance fees – even if you keep a hefty sum in your current account. Until last August for example, you were able to avoid Bank of Ireland's €20 a year account maintenance fee by keeping at least €3,000 in your account.
You can no longer avoid this fee by keeping €3,000 in your account unless you're a student or aged 60 or more. Furthermore, from early next year, you must be 66 to qualify for the 'Golden Years' free banking.
...AND HIT US WITH OTHER BANKING CHARGES
As well as hitting us with current account maintenance fees, the banks have hiked charges on current accounts and credit cards since the bank guarantee kicked in.
In summer 2009 for example, Ulster Bank more than doubled its unpaid item fee – which is charged when you don't have enough in your account to clear a credit card transaction. The fee was increased from €3 to €7.
Banks have also whacked customers with a raft of new charges. On October 20, 2008 – a few weeks after the bank guarantee – Bank of Ireland introduced two new fees on its Platinum Advantage card. Since that date, holders of that card have been paying a €7.50 late payment fee every time they're late paying their credit card bill, and a €7.50 over limit fee every time they go over their credit card limit.
In December 2008, Permanent TSB started to charge a late payment fee of €7.50 on its Ice card. It had not charged that fee before then.
A spokeswoman for the Irish Banking Federation, which represents banks, admitted that bank fees and charges were generally moving "upward".
"This has occurred as banks here and elsewhere have sought to move away from the cross subsidisation model, which is now no longer sustainable, and return to a more realistic pricing which reflects the underlying costs and risks of the products and services they provide," says the spokeswoman.
"Significantly, this also reflects the requirement to return to profitability – a consideration that's all the more important for those institutions that have been recapitalised by their governments."
BUT WORST OF ALL, THEY'VE WHACKED UP INTEREST ON LOANS
If you apply for a mortgage with a bank today, prepare for your toughest grilling yet – that's how hard the bank interview will be. Even if you can manage to get a mortgage, you'll pay a much higher interest rate than the borrowers who snapped up a cheap tracker mortgage before the banks started to pull them in 2008.
Expect to pay between 4.5 and 5 per cent interest on your mortgage today if you opt for a variable rate. That's between two and three times the interest paid by those on tracker mortgages and about five times the European Central Bank base rate – the rate which normally determines the amount of interest you pay on your mortgage.
The interest charged on personal loans has also spiralled. In early 2008, you could have got a personal loan with an interest rate of 7.7 per cent from Ulster Bank – today you'll pay as much as 60 per cent more interest for the loan.
Banks are building "excessive margins" into their lending rates, according to banking expert Ronan Coburn of The Bottom Line consultancy.
"Banks are only sanctioning very low-risk activities, at 'high-risk' margins which are over and above the cost of funds," says Coburn. "There are no active banks dealing fairly with good quality borrowers, without charging them very onerous lending rates. These rate are entirely unjustified, in an economy endeavouring to stage a recovery."