Customers shift money out of savings to avoid bank fees
Families are shifting money out of their bank deposit accounts and moving it into current accounts in an effort to avoid bank transaction charges.
There was a reduction of €30m in the savings of households held in banks here in July.
This took the total savings of households in banks down to €91.25bn, new figures from the Central Bank show.
But even though households are putting less into savings accounts, they have increased the amount of money going into current accounts, a breakdown of the figures shows.
There was a rise of €400m in the funds put in by households in July to what the Central Bank calls overnight deposits, which includes current accounts.
Financial experts said this reflected the fact that most banks impose bank charges on consumers if they do not hold set levels of funds in their current accounts.
Calculations on the Central Bank figures by Simon Moynihan of price comparison site Bonkers.ie show that since the beginning of the year €2.25bn has come out of term accounts, and €2.27bn has gone into overnight accounts, which include current accounts.
He said this meant that people were moving huge amounts of money from deposit accounts into current accounts.
"Although the Central Bank does not give specific statistics for current accounts, I think that it is reasonable to assume that people are taking money from their savings accounts and using it to cover the fee waiver for their current accounts.
"In fact, since the beginning of the year, the amount of money in overnight accounts has grown every month and the amount of money in term accounts has fallen every month," Mr Moynihan said.
Bank of Ireland requires its current accounts to have a credit balance of €3,000 at all times to avoid transaction charges. From next month Ulster Bank will only waive a monthly fee if current account customers keep a credit balance of at least €3,000 in the account at all times. AIB requires customers to keep a credit balance of €2,500 to avoid fees and charges.
KBC Bank will only waive ATM and cheque processing fees if customers maintain a minimum daily credit balance of €2,000 in their account.
Meanwhile, lending to households continues to fall, the Central Bank figures show.
New lending is so low that more money was paid off existing mortgages than the amount taken out in new mortgages in July. Lending decreased by 3.9pc in July. Loans for house purchase, which account for the majority of lending, declined at an annual rate of 3.1pc, while lending for consumption and other purposes was down by 6.5pc over the year.
Household loan repayments exceeded drawdowns by €437m in July, mainly driven by the €255m decline in mortgages.
Economist with Merrion Stockbrokers Alan McQuaid said the weak lending was the most disappointing part of the economic recovery story.