John Hearne reviews the merits of digital banking services which do not charge fees, but which also do not offer loans, overdrafts or credit cards.
If you are an Ulster Bank customer, you saw a stiff increase in current account charges on Good Friday.
Under the old fee structure, Ulster Bank customers paid a €4 monthly account maintenance fee. After that, all day-to-day banking was free, which meant no charges for direct debits, taking money from an ATM, or for using your card to pay for things in store and online.
Under the new fee structure, the account maintenance fee is being reduced to €2. However, at the same time, the bank is introducing a host of fees for day-to-day transactions like direct debits, ATM withdrawals and contactless and chip and pin transactions.
Of course, Ulster Bank isn’t the only one to have piled on the bank charges for current account use.
All of the main banks charge heavily for the privilege of banking with them. Why? Because they can.
“The level of switching in the current account market is chronically low at less than 1%. This is why banks can get away with charging so much,” remarks Daragh Cassidy at price comparison and consumer website bonkers.ie.
“But if you’re not happy with your current service you should look at switching.
The alternative is to check out one of the digital banks that now operate in Ireland. The two best known of these ‘fintech’ players are N26 and Revolut.
They have no high-street presence and operate entirely online, with customers accessing their accounts via intuitive, user-friendly apps on their phone. Both banks offer free as well as premium accounts, for which you pay a monthly fee.
Bonkers.ie recently brought out an excellent consumer comparison of the free accounts offered by both banks.
But first of all, who are they, and is it safe to entrust them with your money?
N26 is a German Bank which now operates in over 20 countries in Europe, with plans to launch in the United States shortly. The bank has around 2.5 million customers worldwide.
It is licensed by the German Central Bank and the European Central Bank and operates in Ireland on a European Passport.
N26 customers are covered by the German deposit guarantee scheme and are regulated here by the Central Bank of Ireland for conduct of business rules so your money is as safe with this bank as with any of the traditional Irish ones.
When you open an account you’ll immediately be given an IBAN and BIC number, meaning that you can get paid by your Irish employer and set up direct debits and standing orders just as you would with any other Irish bank account.
Revolut is a UK fintech company which launched in 2015 and now has over three million customers.
Like N26, you’ll be given an IBAN and BIC when you open your account so you can do all the day-to-day things that you’d expect with a normal current account.
It’s currently licensed as a bank in Lithuania and is working on getting the license transferred across to Ireland under the same EU passporting rules that N26 has followed.
Daragh Cassidy points out that Revolut has suffered through a bit of a PR crisis lately with reports of a toxic working culture.
Both of these banks are digital, with no branch structure and no facilities for dealing with cash or cheques. Both allow you to open an account online in just minutes from your phone.
You download the app, fill in some personal details, then take a picture of your passport and a selfie with your phone and submit it through the app.
Your new account will then be set up and you’ll be issued with an IBAN and BIC almost immediately. Your physical card will be sent out in the post and should arrive in around one week.
It’s free to open an account with N26 while Revolut will charge you €6.
Both offer largely free day-to-day banking. There’s no monthly or annual maintenance fee with either bank and there’s no charge for chip and pin or contactless transactions. There’s no fee for standing orders or direct debit payments either.
Withdrawing cash is a bit different. With N26 you get five free ATM withdrawals a month. After that there’s a hefty €2 charge per withdrawal. Revolut allows you to withdraw €200 a month. After that, you’re charged a 2% fee per withdrawal.
N26 supports both Apple Pay and Google Pay in Ireland. Revolut only supports Google Pay here for now.
As well as free day-to-day banking, the lack of foreign exchange fees makes both these accounts extremely attractive for anyone who travels a lot.
All the traditional banks will charge you a 1.75% to 3% foreign exchange or ‘processing fee’ for purchases made with your debit card outside the Eurozone. These can really add up. N26 will charge you nothing while Revolut will charge you nothing up to a limit of €6,000 a month. After that there’s a small 0.5% fee.
What’s more, when converting your spend back into euro, N26 applies the Mastercard exchange rate at all times while Revolut applies the Interbank exchange rate with a 0.5% mark-up at weekends. Both these rates are likely to be better than the rate you’d get with one of the main banks.
The Interbank rate is usually slightly more competitive than the Mastercard rate but because Revolut charges a 0.5% mark-up at weekends, both banks largely come out the same in the end.
All the above also applies to money transfers.
If you’re withdrawing cash abroad, N26 will charge you a 1.7% fee while Revolut allows you withdraw the equivalent of €200 a month at no charge, after which a 2% fee is added.
Both these fees are way more competitive than the 3-4% fee you’d be charged with the traditional Irish banks.
Both banks will give you up-to-the-minute push notifications on your spending and analytics that break down your spend for you.
Revolut also has an ingenious money-saving feature called Vaults. Every time you make a purchase with your card, Revolut will automatically round up your transaction to the nearest whole number and place the difference into your Vault.
So if you buy your coffee for €2.80, €0.20 will go straight into your Vault. Think of it as your online coin jar.
With Revolut, you can also put a limit on how much you want to spend each month and every time you make a payment you’ll be notified how much is remaining — so a great tool for budgeting.
With N26 you can do similar by setting a daily limit for cash withdrawals as well as for payments.
Both N26 and Revolut offer fingerprint login plus the choice to freeze your card in the app and unfreeze it. This avoids the pain of cancelling all your cards unnecessarily.
Neither N26 nor Revolut offer access to loans, overdrafts or credit cards for now but both fintechs plan to offer some of these services in the coming year or two.