Planning for the New Financial Year | July 15, 2016
Did you know that Australians forked out more than $4 billion last year in avoidable bank fees? That means that the average Australian household is paying about $468 a year in bank fees, or $9 a week.
Comparison website RateCity has crunched the numbers to find people are unnecessarily handing over money for all types of products, from credit cards and home loans to savings accounts and every day banking accounts. The combined $4.33 billion in fees — an increase of 3 per cent, or $121.7 million, from 2014 — were avoidable either by avoiding late payments, or switching to products that charge no ongoing fees.
It’s easy to WIRMI that all banks are in a fee frenzy, but a little bit of planning at the start of the financial year can see a big difference in the amount you’re paying.
Credit Card Fees
Credit Card Fees: For Australian households, more than $1.5 billion was charged by banks on credit card, loan, and other types of late fees, up 5.9% on last year, making it the biggest source of bank fees. Annual credit card fees, are another easy-to-avoid cost, with 32 credit cards offer no annual fees.
ATM fees are a considerable contributor to bank fee totals, and yet it is also one of the easiest to avoid for the majority of people. We are told upfront about these fees and have the opportunity to cease a transaction before incurring the fee, however two in every five ATM transactions are still made at a machine not owned by the customer’s bank network. There’s no excuse for incurring this fee in major cities, with more ATM’s around than ever. Don’t let convenience outweigh cost.
Late Payment Fees
Late payment fees: Roughly $600 million a year is estimated to be charged by banks on credit card, loan, and other types of late fees. But paying on time will avoid this fee. Arranging a direct debit to pay at least the minimum payment each month is a potential safety net against forgetting or missing a payment.
Home Loan Fees
Home Loan Fees: Application fees can be an expensive cost before your home loan is finalised, and this can be followed by more valuation and legal fees that banks charge when you get a home loan. Around 50% of home loans don’t include an application fee, so again, it’s something that you can potentially avoid. Missing a repayment, as mentioned above, can also be an expensive exercise for households, adding extra time and costs to loans. Home loan bank fees cost Australians around $1.25 billion in 2015, with home loan fees being as high as $750, yet 761 mortgages have no ongoing fees, says RateCity.
Monthly Account Fees
Monthly Account Fees: Australians spend upwards of $1 billion on account keeping fees each year but this can be avoided by choosing a different account type. It pays to keep your eyes open to other opportunities with roughly 68 transaction accounts in Australia that don’t charge account fees. Paying an account keeping fee doesn’t necessarily equate to increased features on your account, so make sure you review your personal circumstances to ensure your account meets your needs, or have a chat with your financial advisor.
“Have a look at what you’re being charged and see how it stacks up to the competition — in most cases you’ll be able to switch to accounts that don’t charge any fees at all” says RateCity money editor, Sally Tindall. This advice is general in nature, and it is important that you take into account your personal circumstances to ensure you find a solution that meets your specific financial situation, so contact your financial advisor today.
Source: Reserve Bank of Australia
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the information, consider its appropriateness to your circumstances.
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