Bank fees paid by households – 30% are avoidable

Sydney, 21 May, 2009: The Australian Bankers’ Association (ABA) said analysis shows there is considerable scope for households to reduce their total fees paid to Australian banks. By some simple changes in behaviour and using tools provided by banks, customers could save a reasonable amount.

The ABA was today commenting on the Reserve Bank’s Bulletin article, ‘Banking Fees in Australia’ which collected data on exception fees for the first time. Exception fees¹, along with fees for using foreign ATMs² are avoidable.

The ABA today also released its ‘Fees for Banking Services 2009 Report’ which found that an estimated minimum of 33% of total fee revenue collected from households could be reduced if consumers changed their banking behaviour.³

David Bell, Chief Executive of the ABA, said: “The fees which could be avoided are $954m worth of exception fees and $640m⁴ worth of foreign ATM fees.” (See table below)

“By using your own bank’s ATMs, ensuring accounts are not overdrawn and your credit card paid on time, money can be saved. Avoiding overdrawn fees can be done by checking your account balances before making large purchases,” Mr Bell said. (See over for more tips).

“The ABA’s estimated savings do not include the savings that consumers and households can get by moving to low-cost accounts, such as basic or exception fee-free accounts. If these opportunities are taken into consideration, households, on average, could save a good deal more than 30%.”

“The ABA estimates, based on RBA data, show that exception fees have fallen as a percentage of resident assets. And in particular, exception fees on transaction accounts have fallen as a percentage of household deposits.”

The ABA report on fees for banking services provides analysis of fees paid by households, businesses, low income earners, fee revenue adjusted for asset growth, and in relation to profits and income. It can be found at weblink: www.bankers.asn.au/Fees_for_Banking_ Services_2009_Report

Tips to avoid exception fees

• Regularly check your account balance via ATMs, telephone and Internet banking to ensure there are sufficient funds available to cover any transactions or purchases. Check when your periodical payments or direct debits are due and reschedule them if necessary.
  
  
• Choose a bank account that does not charge exception fees at all. The ABA recommends that eligible low income earners ask their bank about these accounts.
  
  
• Some banks will switch off the ability to exceed your credit card limit on electronically authorised purchases and cash transactions. Alternatively, you can examine your individual circumstances to determine whether a higher credit limit would be more appropriate for your circumstances, subject to meeting your bank’s normal credit approval criteria.
  
  
• To avoid late payment fees you should ensure that you pay at least your minimum monthly payment by the due date. To assist with this you may want to consider noting when the payment is due in your diary, or set a reminder for yourself.
  
   
• Contact your bank to see if the following services are available - SMS alerts for both successful and missed transactions or a ‘sweeps’ facility to automatically transfer funds from another account when a direct debit is presented which may overdraw an account.

 
Tips to avoid fees at foreign ATMs⁵

• Use your own bank’s ATMs or fee-free networked ATMs;
   
• To find your closest ATM – contact your bank. Telephone banking staff will help locate the closest ATM or bank websites have tools to locate your nearest ATM – wherever you are in Australia. Some banks also have SMS tools. For example, you SMS your suburb and state a telephone number and the bank will reply with the addresses of local ATMs;
  
  
• Ensure you don’t authorise a transaction that is too costly. In a foreign ATM transaction, remember the screen will disclose the ATM operator fee, and it is your choice whether or not to pay it;
  
  
• Consider using EFTPOS and getting additional cash out with a purchase – this is popular at supermarkets;
  
  
• If your bank does not have a large fleet of ATMs, customers can avoid a direct charge at an ATM by using the ATM card in a way that is advised by their bank or choosing a product which minimises these fees. Contact your bank to discuss.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
           
ENDS

[1] Exception fees on consumer savings and credit card accounts include those that may be applied to dishonoured cheques, late credit card payments, overdrawn accounts and exceeded credit limits.
[2] An ATM which does not belong to your bank or is not in a networked arrangement.
[3] This assumes no change to bank fee structures. 
[4] Estimated based on the number of transactions at foreign ATMs – assuming households make up 80% and transactions cost $2. For the entire methodology on this table, please see page 35 of the ABA report.
[5] Also called direct charges. In March this year, Reserve Bank reforms allowed ATM owners to directly charge consumers.  Direct charging lets you know upfront how much you will be charged by the ATM owner for making a transaction via an on-screen message. You can then choose whether to use the ATM and pay the fee shown, or cancel the transaction at no charge and go to another ATM. However during the survey period (financial year 07-08), customers were charged by their bank when they used a foreign ATM. The foreign ATM fee covered a charge from the ATM owner and other costs.