In the ‘Fees for Banking Services Report’ , the ABA estimated the average cost of banking service fees for households was around $11.50 per week, an increase of around 13 cents (1% ) over the past year.

Steven Münchenberg, Chief Executive of the ABA, said: “This is a positive result for households. While people are using their banking services more frequently, this is not being matched by a similar increase in the total fees they are paying.  We also know that as most fees are paid by wealthier households, low income earners will be paying less than the average.”

“Customers are completing more transactions on more accounts, taking out more loans and are buying more products and services from banks. At the same time, banks have cut some fees on transaction accounts, reducing the cost of those accounts. The result of these two factors combined – increased volumes of business and fee cuts - meant that the average cost of banking per transaction has fallen for households.”

Overall, bank service fee revenue increased by 8.6% to $12.6 billion of which $5.03 billion was collected from households. More than 60% of the increase in fee revenue came from large businesses buying more loans from banks during the global financial crisis (GFC) when capital markets froze.

Why has the average cost of banking per transaction fallen for households?

The ABA’s report notes that customers are accessing cheaper accounts to meet their needs.
Customers can choose an account that charges no monthly fees. Or customers who complete a lot of transactions may choose an ‘all-you-can-eat’ account which gives multiple free transactions for a simple flat fee of around $5 a month. For those on low incomes, a basic account which charges no monthly fee may be the smart choice. These accounts often have other restrictions.

Customers are also moving away from higher-cost channels like branches and cheques, towards lower-cost channels like - Internet, credit card, telephone, EFTPOS and direct entry credits/debits.

Mr Münchenberg said: “Competition has been driving banks to reduce fees. This has resulted in a significant fall of 11% in the amount of fees collected by banks from households on transaction accounts.”

“There is a lot of choice in the marketplace – accounts with no monthly fees, free accounts for children, students and pensioners or low cost accounts for those who make a lot of transactions. If you think you’re paying too much in fees - get smart about your banking – call your bank and see if there’s a better product which suits the way you want to transact.”

Why is volume increasing?

The reason that total bank fee revenue increased from households is because customers did more business with banks.  For example, in 2009 the number of credit card accounts increased by 343 000. For each one of these accounts, an annual fee is typically payable. For the same period, almost 1.5 billion credit card transaction were made, which increased by  43 million, compared to the previous year.

Which customers drove the increase in bank fee revenue?

Bank service fee revenue was paid by households and businesses – both small and large. The majority of the revenue, around 60%, came from businesses.

In terms of the increase in bank fee revenue collected, large businesses drove more than 60% of the increase because big businesses turned to the solid and reliable banks for loans when capital markets did not function during the GFC. Growth in bank service fee revenue from small business was 6.6%, unchanged from 2008.

Exception fees

In 2009, exception fees¹ totalled $1.2 billion, virtually no change over the previous year. Exception fees paid by households on their transaction accounts fell by $38.6 million or 7.6% over the previous year after exception fees were reduced by a number of banks.  

This year’s data only partially reflects the initial impact of these reductions. These will flow fully through to the data next year. The voluntary reduction on exception fees by the banking industry is expected to cost it $550 million a year.

ATM fees

Changes made last year mean that a consumer is told that a fee is payable for using an ATM which does not belong to their bank or is not in a networked arrangement.

Mr Münchenberg said: “The data show that customers are exercising choice by using their own bank’s ATMs or by taking cash-out through EFTPOS. Managing your cash and using your own bank’s ATMs or EFTPOS cash-out are the simple steps that will allow customers to avoid these fees.”