A guide to low-cost banking options for savvy Irish consumers

We are staggeringly bad at it: figures from the Central Bank show that just 3,600, or 0.06 per cent, of the State’s 5.2 million banking customers, switched their current account in the first half of the year.

It’s not because we’re all so happy with our providers that we’re not switching; bank charges have risen steadily and insidiously over the past number of years as competition departed the market.

Could the new year though be a good time to reconsider your options and should Irish consumers consider options such as German mobile bank operator N26, which finally launched its full service to Irish consumers on December 6th?

What is N26?

Berlin-based fintech N26 launched last year in the Irish market as Number 26, offering a free current account to Irish customers via its smartphone app.

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However, ahead of a banking licence application, the start-up halted its roll-out across Europe.

N26 finally received its full banking licence in Germany in July, which means it can now offer a fuller range of products across Europe and, on December 6th, the bank launched its new banking offering across 17 countries, including France, Spain, Italy – and Ireland.

The bank offers money transfers, investments and overdrafts (of up to €2,000), and says further credit products, plus deposit accounts and insurance products, are on the way.

Backed by Paypal founder Peter Thiel's Valar Ventures and by Axel Springer, the German publisher, the start-up has emerged as a credible banking option in recent months, with some 200,000 customers, most of whom are in Germany.

However, with its latest launch into 17 new countries, this number is likely to grow rapidly.

Is it free?

It is still possible to get free banking in Ireland; it has just become more difficult to do so. With AIB, for example, you must keep €2,500 in your account at all times. Ulster Bank requires you to keep a balance of €3,000 to avoid charges, while it's a bit less, at €2,000, with KBC.

With Bank of Ireland, you can avoid transaction charges by keeping a minimum of €3,000 in your bank account at all times, but you can't avoid the quarterly maintenance fee of €5.

Best of the bunch perhaps is EBS, which in September changed the terms of its current account. Previously you had to keep €500 in your account or have €1,500 lodged every month to avoid charges.

Even then, you were still only entitled to five free withdrawals a month, otherwise they cost €1.50. Now it doesn’t matter how you use your account. Withdrawals will cost just 30 cents regardless of whether it is done at an ATM or in person at an EBS office. So if you limit your banking use to a couple of withdrawals, it can be cost-effective.

So how does N26 compare?

Well, if you want to get free banking with the operator, you had better move fast. Up until February 1st, N26 will allow you to open a bank account and avail of a MasterCard for free.

This means that you can access five free ATM withdrawals a month and pay nothing for debit card purchases – even outside the euro zone. ATM withdrawals are also cheaper in countries outside the euro zone than the domestic Irish providers.

However, if you leave it until after February to open an account, you will pay €2.90 a month (€11.60 a quarter) in charges, plus an additional €2 for every ATM withdrawal should you exceed the five free options.

N26 also offers a premium option, N26 Black, which offers a current account, plus insurance, for a fixed monthly fee of €5.90 a month (€17.70 a quarter).

For the subscription fee, you will get a MasterCard and a comprehensive insurance package from Allianz Global Assistance Europe, which includes travel, health, mobile phone or cash theft, as well as an extended warranty for electronic devices.

It is a useful account for frequent travellers, as there are no charges for ATM withdrawals outside the euro zone.

N26 however is not the only European mobile banking provider offering services to Irish consumers. Dutch operator Bunq says that the only thing you need to open a bank account with it is a mobile phone.

It allows you to open up to 10 bank accounts – “one for your salary, the groceries, your vacation” – each with its own Iban, send money to anyone by using your phonebook contacts and set up a group bank account, maybe to cover household expenses for people sharing a house.

Many of its functions, such as sending and receiving Sepa payments, are free, but you will pay €9 for a debit card, which is valid for four years.

You will also pay potentially more for ATM withdrawals than with a local bank, at €0.80 for each transaction, so, on a day-to-day basis, Bunq may not be the most cost-effective.

While Bunq has not yet formally launched in Ireland, a spokeswoman says Irish customers are welcome to join and can open an account via video. You’ll need a driving licence/passport, plus proof of address to open an account.

What about travelling abroad?

An online operator like N26 really comes into its own when it comes to foreign transfers and can work out far cheaper than your regular bank account. Consider first travelling inside the euro zone.

A €50 restaurant bill paid with a debit card will attract a charge of 20 cents with AIB, for example, whether it’s in Cork or Corfu.

Contactless payments are also economical, with AIB imposing no charge on these payments until February 24th, 2017.

When it comes to ATM withdrawals, the same charges as at home should apply, unless of course an additional charge, which could be of the order of about €3, is applied by the local operator of the ATM.

Step outside the euro zone, however, and charges can quickly ratchet up.

You will typically pay a charge of up to €11.43 on a non-euro purchase. Ulster Bank, for example, applies a 2 per cent fee on non-euro purchases, up to a maximum of €12. Not only that, but you may also find yourself stuck with not-so-attractive exchange rates.

With N26, on the other hand, purchases in any foreign currency are completely fee-free, which means that you won’t be hit with an additional mark-up on the exchange rate set by MasterCard, and it promises that “unlike most banks, there’s no exchange rate mark-up”.

This means that when buying a jacket in London, you should be getting close to interbank exchange rates.

For withdrawals, you can expect even heftier costs. N26, for example, levies a fee of 1.7 per cent of the cost of the withdrawal in a foreign currency, but this still compares favourably with local operators.

With Bank of Ireland, you will pay a fee of 3.5 per cent, up to a maximum of €11.43. So, a €100 withdrawal in London will cost you €1.70 with N26 or €3.50 with B of I.

If you are a frequent traveller, it may be worth upgrading to a N26 Black account and paying the additional fee, as there is no fee for ATM withdrawals.

Foreign currency transfers are also cost-effective with N26 and the account may make sense for someone living abroad, purely to transfer foreign currency home.

With Transferwise, it says it can offer transfers of up to €25,000 in 19 currencies, at a fee “as much as six times lower” than that of traditional banks. It applies a minimum fee for sterling-euro transfers of £2, for example, or 0.5 per cent of the transaction.

How about customer service?

Bricks and mortar or an online chat? It is an ongoing challenge facing low-cost online operators. When it comes to people’s money, many people still like having the option of having a branch they can physically call into – and for good reason.

While online chats can be very time-efficient when they work well, it takes some time, for example, to locate the “contact our support team” button on N26 and a phone number for support is not immediately obvious – and, of course, it’s in Germany, which means an added expense if you have to ring.

However, amid branch closures, job cuts and an increased emphasis on digitalising services, even with our mainstream traditional banks, it can be difficult to discuss an issue you may be having, face to face.

What about stamp duty?

Remember that every card you take out in your name is subject to government stamp duty, which can make opening several accounts less attractive.

You will pay €2.50 on an ATM or debit card or €5 on a combined ATM and debit card, such as Visa or MasterCard debit, every year. If you need a credit card, you will pay substantially more – €30 a year.

These charges apply regardless of whom you get your card from, be that the German-based N26 or an Irish bank.

According to the Revenue Commissioners: “All cards regardless of the location of the issuer are liable if the cardholder has an address in the State.”

ANDROID PAY – HOW DOES IT WORK?

N26 is not the only electronic banking product available on the Irish market. Ireland has finally caught the wave of mobile payments and, following its launch in early December, Android Pay is here at last.

However, its application is limited – only Visa and MasterCard cardholders with AIB and KBC Bank will be able to use it, although this may increase in time.

Moreover, it only works if you have an Android phone – and as of yet, there are no indications as to when Apple Pay might launch in the Irish market.

Android Pay works just like contactless payments, but instead of flashing your credit or debit card, you will hold your phone up to the retailer’s payment device. International use shows it is secure.

When you add a personal credit or debit card to Android Pay, the actual payment card details are not stored on the device or on Google’s servers.

Instead, Visa generates a unique token that replaces the sensitive data found on a debit or personal credit card.

This means that if you lose your phone, you won’t have to cancel your cards, but you will have to cancel your digital cards.

To start using Android Pay, you need to download the Android Pay app from Google Play Store and add your personal credit and debit cards.

If you are already happy using contactless payments, you might wonder why you need another device to help you spend your money, but it could be handy if you forget your wallet but have your phone with you. It also helps you track your spending.

You can expect to pay the same fees with Android Pay as you do for contactless payments with your bank. AIB, for example, imposes no charge if you use it like a contactless card until February 24th, 2017, but an “account transaction fee” of €0.20 may apply when using it for In-App purchases.

And remember that your mobile network operator may separately charge you fees in relation to your use of the digital wallet.

There is no minimum or maximum spend with Android Pay; however, not all merchant terminals will support spend above €30 yet.