What’s the point of Permanent TSB’s new current account?

Permanent TSB may not have shaken up the current account market with its new "ground breaking" product to any great extent, but its Explore account, which offers casbacks and other rewards, does add another welcome element of competition.

Indeed possibly the biggest problem facing consumers when it comes to current accounts is the significant decline in competition. Back in 2006, consumers had a staggering 14 current account providers to choose from and, unsurprisingly, free fees were pretty much a given in such a competitive marketplace. Now the number of providers has plunged by 57 per cent to just six. And the cost of banking has jumped in the other direction.

PTSB is now promising to offer consumers a “win win” proposition with its new account; but its convoluted structure may leave customers wondering what the point of it all is.

PTSB

Previously, customers of Permanent TSB could avoid quarterly fees of € 12 if a lodgement of € 1,500 was made each month.While this offer will remain in place for existing account holders, it won't be an option for new customers, who will have to opt for the bank's Explore product. With this, they will receive cashback payments, up to a maximum of € 5 per month, and rewards, such as reductions on utility bills, for using their account. The catch however, is that the account charges a flat € 4 monthly maintenance fee (same as the old quarterly fee) - so the net benefit to the consumer is €1 a month, provided that they use their debit card online or instore 50 times in a month, in addition to the other rewards/reductions on offer.

In reality however, one might expect the typical consumer to use their card fewer than this a month, which means that consumers may actually end up paying bank charges with this product. Indeed banking customers typically make about 17 qualifying transactions a month, which would earn them €1.70 with PTSB’s new account. With such usage, it would leave customers with a net charge of € 2.30 a month. If, however, the customer uses their card more than about 1.6 times a day, they could mitigate the costs further, or avoid altogether, these bank charges. PTSB says it expects usage to jump from the typical 17 transactions as a result of customers being paid for using the card.

Rewards will also come from the account’s relationship with other partners, such as Sky, SSE Airtricity and Topaz, with cashbacks of up to 5 per cent of the value of the relevant bill paid, as well as weekly discount offers. One possible issue for customers is that a) they must be customers of the aforementioned partners and must pay by direct debit to benefit; and b) shopping around might achieve greater savings.

PTSB gives the example of someone with a €110.50 electricity bill, a €29.50 a month Sky bundle, who uses their card 10 times a month, ending up with total savings of €4.69 a month. Of course PTSB will be able to hold onto the difference between the cash-back (€1 in the above example) and its monthly fee (€4), with discounts from the bank’s partners cutting costs for the consumer.

Free banking? Yes but PTSB's new product appears to have made the process more difficult, and customers of the product may face fees of €2.30 a month. This charge may be offset by reductions on bills such as those with Sky Ireland.

Bank of Ireland

There is no way to avoid current account fees at Bank of Ireland; the only thing you can do is to try and keep them in check. One way of reducing fees is to avoid the quarterly fee, which comes out at € 20 a year. To do this, you must keep a balance of € 3,000 in your account. However, you will still be stuck with other charges, including 0.25 on ATM withdrawals, € 0.10 for a debit card purchase and € 0.10 for an internet transaction.

Free banking? No

EBS

AIB subsidiary EBS does not charge a quarterly fee, but it does impose a fee of €0.30 on each ATM withdrawal, plus a similar amount on in-branch transactions.

You can cut costs - albeit not completely - by saving yourself the cost of five withdrawals a month. To get this, you will need at least € 1,500 lodged to your account every month, or you will need to keep a minimum balance of € 500.

Free banking? Depends on how often you make withdrawals

Ulster Bank

Ulster Bank moved from a free banking model in 2014 to a new system, whereby to avoid charges you have to keep a minimum balance of € 3,000 in your current account in order to avoid monthly charges of € 4.

Free banking? Yes provided conditions are met

AIB

State-owned bank AIB has a quarterly fee of €4.50 on its current account. It also applies additional transaction fees, such as €0.35 per ATM withdrawal, for example.

But it is possible to avoid these charges. If you’re a mortgage customer of the bank for example, you will be entitled to free banking, provided that your repayments are made by direct debit from an AIB current account. And if you keep €2,500 in your account at all times - and don’t miss a day - you won’t pay fees.

Free banking? Yes provided conditions are met

KBC Bank

Customers of KBC Bank must pay quarterly fees of €6 plus an ATM withdrawal fee of €0.30. However, these fees can be avoided provided that the customer lodges a minimum of € 2,500 into their account every month.

Free banking? Yes provided conditions are met

Pan-European contenders

Irish consumers should remember that they don’t just have to stick with an Irish based bank for their current account - a number of new pan-European mobile current account providers have sprung up in recent years , offering their services in Ireland on a freedom of services basis. And they’re significantly cheaper than their Irish counterparts.

Number 26 for example, is a subsidiary of German bank Wirecard Bank, launched in Ireland late last year. It offers a current account specifically for the smartphone, and allows users to send money to friends via text message or email with just a few clicks. Another option is Revolut, a global money app. It promises to cut your hidden banking fees to zero, and it’s also available for Irish residents.

Free banking? Yes