First it was cashback mortgages, now its cashback current accounts. About two months ago, and with much fanfare, PTSB launched its “ground breaking” explore current account with the hope of attracting new customers.
What is so different about this current account - which other providers don’t have - and is it worth opening up one?
The first thing is that it is offering a cashback facility where they will pay account holders €0.10 for every debit card purchase, including point of sale transactions and online shopping, up to a maximum of €5 per month.
However, the account isn’t without charges, because there is a €4 monthly fee to operate the account regardless of how much is credited to your account each month, or how much remains in your account every day.
So, in order to avoid having to pay this €4 monthly fee, you would have to make 40 debit card transactions every month. If you use your card 45 times for example, then your account will be debited the €4 fee but credited €4.50, so you will be 50 cent better off.
But how many times do we use our card to pay for things? Would we use it 40 or 50 times each month? Some might, some might not.
Research shows that on average we use our card 17 times each month, and if this was the case for you, and you opened up this new account with PTSB, you would still end up paying €2.30 in charges each month.
You would need to be using your card about 1.3 times every day in a typical month to avoid charges altogether in this new account. PTSB has said it expects usage to jump from the typical 17 transactions as a result of customers being paid for using the card, but I bet they are hoping people won’t.
The second benefit is PTSB’s partnership with SSE Airtricity, Sky Ireland and Topaz (others are expected to be added in the coming months). If your monthly bill payments to each of these organisations is debited from your new explore account, you can earn up to 5% cash back on the cost of your bill.
Explore Account customers who pay their SSE Airtricity bills by direct debit for example will receive 2% of every payment back into their bank account at the start of each month. So, if your monthly bill is €100, you will get cashback into your account of €2. The average annual electricity bill for Airtricity customers is c. €1,206 so the potential saving with them over the course of one year is €24.
So, how does this new account measure up with other large current account providers, and what fees if any do they have?
Let’s start with Bank of Ireland. If you have a current account with them, unless you are over 65, a graduate or a 2nd or 3rd level student, you will be charged a quarterly fee of €5, and there is no way you can avoid this fee.
You can reduce transaction fees but you must keep a balance of €3,000 in your account at all times. If you don’t, you will still be stuck with other charges, including 25c on ATM withdrawals, 10c for a debit card purchase and 60c for an over the counter transaction.
Free banking is available from Ulster Bank, provided you keep a minimum balance of €3,000 in your account all the time during their charging cycle, but if you don’t a monthly fee of €4 will be charged to your account
You can qualify for free banking with AIB provided you keep €2,500 in your account at all times. If you don’t they will apply a quarterly fee of €4.50 and will apply additional transaction fees, such as 35c per ATM withdrawal and 35c for machine lodgments as well.
There is another way to avoid current account fees with AIB, especially if you have your mortgage with them. They are offering free banking to around 90,000 of existing mortgage customers and to new ones as well provided your mortgage repayments are debited from an AIB current account.
Customers of KBC Bank must pay quarterly fees of €6 and additional charges for ATM transactions (30c) and cheques lodged (30c as well) on its standard current account, yet, by upgrading to KBC’s Extra Current Account, customers can enjoy free day-to-day banking and no account maintenance fees, once the customer lodges €2,500 throughout the month.
However, if you are looking to buy a property for the first time, then a current account with them could be a smart move.
KBC is offering a 0.2% reduction on the interest rate charged on the life of a mortgage for current account holders of theirs. This is a very good offer because it means the variable rate the bank would ordinarily charge is reduced from 3.85% to 3.65%. The difference this 0.2% would make on interest payments on a €150,000 mortgage over 30 years is a €6,128 saving, so if you are getting a mortgage from them anyway, set up a current account and take advantage of that rate reduction.
The good news for existing current account customers of PTSB, is they can keep their account. In order to avoid paying fees with this older type current account, you just need to have €1,500 lodged to your account each month. You don’t have to maintain a minimum balance in it to avoid paying fees.
As you can see it is still possible to get free banking with either, PTSB, AIB or Ulster Bank.
One final thought. If you have €3,000 sitting in an account earning 0.25%, then your net return after 12 months will be €4.42. If you lodge the €3,000 into your current account instead with those who set minimum balance amounts, you will save yourself quarterly fees and get a return four times greater than you would, by having it sitting in an account earning practically nothing.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie