Banks still claim billions in fees

Provided by: InfoChoice

Despite claims from the major banks that fees are on the way down, Australian consumers are still expected to pay more than $4.5 billion in bank charges this year.

While consumers were given some reprieve thanks to recent reductions in exception fees such as overdrawn account and dishonour fees, InfoChoice says the average household will still have to cough up well over $500 a year for bank charges.

"The irony of recent downsizing in exception fees is that customers doing the right thing receive no reward, as in most cases they would have avoided these fees anyway," said InfoChoice CEO Shaun Cornelius.

According to a recent InfoChoice survey, which looked at the major financial product categories, bank customers are significantly less concerned about penalty fees such than they are for costly service and account keeping fees.

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When it comes to home loans, the research shows that just 38 per cent of customers nominate establishment and maintenance fees as their primary concern, as opposed to more than 60 per cent that nominate early termination or penalty fees.

The story is much the same for credit cards, transaction accounts and personal loans, with consumers caring far more about annual, account keeping and service fees than about fees for errors such as late payment or overdrawn accounts.

"Australians face a large and complex web of bank fees, with more than double the e fee categories than the UK. What's worse, many bank customers do not even know that these charges exist, or are unaware that they apply to them," Mr Cornelius said.

According to InfoChoice, while most home loan customers are aware they face significant charges for early exit, many fail to consider the impact of such fees as they assume they will be with their bank for the long-term. Considering home owners average a loan of just three years however, exit fees are charged significantly more than might expect.

Considering these fees from the major banks can range from more than $10,000 for early repayment on fixed rate home loan and up to $900 for deferred establishment fees, plus an added $150 - $250 for settlement and administration on variable rate home loans, the financial impact cannot be underestimated.

Even consumers that stay with their mortgage provider are not exempt however, with many banks charging up to $400 for making changes to your home loan (like increasing the loan amount, security substitution or switching from a variable rate loan to fixed), and adding annual charges of up to $395 to those opting for a package fee deal which offer 'discounted' interest rates.

According to InfoChoice, credit card customers should be most wary when looking to use their card while travelling, with overseas transaction and bank processing fees charging up to three per cent and two per cent of the transaction and withdrawal values respectively. In addition, the foreign exchange rates used by retailers and banks are often far from the most competitive rates available.

Many credit card customers also find their Rewards Program significantly less rewarding after factoring in annual membership fees of up to $300.

InfoChoice warns the situation is not much better for customers using their transactions account either, thanks to ongoing monthly administration fees of more than $100 a year, and the recently introduced foreign ATM fees.

For car loans, the major financial impact comes for those who try to get out early, or those using brokers, who face the sting of exit fees, and combined establishment and service fees of up to $1300, respectively.

To help customers avoid paying more than absolute necessary, InfoChoice has developed a list of handy hints on how to reduce bank fees:

InfoChoice Tips to Save on Bank Fees

• Avoid variable rate home loans that charge a deferred establishment fee based on a percentage of the loan value.
  
  
• When applying for your home loan, choose options carefully to minimise future changes
  
  
• Avoid withdrawing cash on your credit card
  
  
• Talk to your bank about eliminating the rewards program annual fee
  
  
• Avoid holding more than one transaction account
  
  
• Consider transaction accounts offered by the credit unions which do not charge an annual fee, or consider the new breed of transaction accounts offered by the Big 4 banks as well as ING and Bankwest which do not charge monthly fees
  
  
• Try to only use your banks' or affiliated banks' ATM's
  
  
• Arrange Car Finance direct with the lender to avoid broker fees
  
  
• If you are charged an exception fee and are a first time offender, call your bank and politely ask them to remove the fee (it has been known to work!)

Source: Infochoice.com.au.

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