Let's put things into perspective here first. Last year Australians paid over $4.33 billion in bank fees, all of which could have been avoided. This data has been brought to light by new analysis conducted by the Reserve Bank. Supporting this theory, comparison website RateCity did the math too and worked out that people were unnecessarily paying additional money for an array of products that they didn’t need.
The $4.33 billion is a result of credit cards, home loans, saving accounts and everyday banking. This is also a staggering increase from figures released in 2014, to the tune of an additional $121.7 million being charged in 2016. The silliest thing is that these fees could all have been avoided simply by not getting caught out by late payments or switching to products that charge no monthly fees.
RateCity´s money editor, Sally Tindall explains that overlooked bank fees can amount to thousands of dollars per person, per year if ignored. To make matters worse, the majority of these fees are avoidable because plenty of fee-free options do exist. Credit cards are a great example, considering that when breaking down the total figure of all late payment fees and cash advances it added up to a total of $1.51 billion for the banks last year. Compare that figure to the year before and its almost $93.7 million more.
Second in the list are home loan fees that totalled $1.25 billion and increased by $32.5 million when compared to figures from 2014. RateCity has looked at the market landscape and found that credit card charges can range up to $1,200 per person per year, but many of these people incurring these fees could be taking advantage of 29 cards currently available on the market that have no fees to pay. If you are a mortgage owner then you will be unhappy to hear that some can rack up bills per year of $750, but there are over 761 mortgage products available with no on going fees to pay.
Moving onto personal loans, customers can spend up to $575 on fees despite there being 24 different zero-fee options available on the market. If you have a transaction and deposit account then you could be charged up to $120 per year if you are not using one of the 67 no-fee alternatives.
Bank's incomes rely on the approach of ‘set and forget’ hoping that customers forget about something they have set up and simply ignore the charges. If you haven’t checked your financial health recently, it’s a worthy exercise to see if you can avoid charges. The great news is that it’s relatively easy to swap over to a new provider that charges no fees at all.
The Australian Bankers’ Association (ABA) revealed within their report that households were paying roughly $9 per week in bank fees. However, with total household spending on the rise, the ABA claims that bank fees have hit a 17-year low.
There are some underlying truths about this because more and more people are converting to fee-free and low-fee transaction accounts that have resulted in a decrease of bank fees being charged. This seismic change has wiped $1 billion out of the market since 2008, whilst fees paid per household for these types of accounts is now lower than it was in 1999.
According to ABA, fees on transaction accounts are also now at their lowest in 15 years, supposedly falling by $1 billion or 51% since their peak in 2008. On the other side, the volume of transactions has increased by roughly 60% over that same period.
Therefore, if you have been noticing charges on your account or you haven’t checked in a while, then it’s well worth the exercise because you could be saving an additional $2,500 per year to benefit your wallet and not your bank.