03.Home loans and credit cards
For overall credit card satisfaction, credit unions are the clear winners, followed by ME Bank, Bendigo Bank, Bankwest, American Express and St George (see table, below). There are five main areas of difference.
Interest rates The mean satisfaction score for banks (37%) is much lower than for credit unions. Part of the reason could be that banks hiked their credit card interest rates even when the Reserve Bank (RBA) cut the official cash rate.
Calculating interest We asked members to rate their satisfaction with their card provider’s application of interest when a bill is paid late or not in full. Again, the average satisfaction score for banks is well below those for credit unions.
Annual fees The average satisfaction score for banks is 44%, compared with the credit unions’ 71%.
Rewards programs Rewards satisfaction is not shown in the table, as for many respondents it wasn’t applicable. However, the average satisfaction scores for banks and credit unions are similar; both compare poorly with American Express. Separate CHOICE research found that American Express and certain cards from banks usually offer the best rewards programs.
Penalty fees Banks’ average satisfaction scores are dramatically lower than credit unions’. However, westpac and St George have reduced their late payment and over-limit fees to $9 and, from mid-December, ANZ will reduces those penalties from $35 to $20.
Home lending is one area where big banks have really increased their market share over the past two years, at times seeming close to obliterating the competition. The Big Four have about 90% of the bank home loan market (and banks write about 90% of all home loans). Building societies, credit unions and non-bank lenders make up the remainder. According to Chris Dalton of the Australian Securitisation Forum, at one time non-bank lenders, a subset of the smaller institutions, wrote 20% of home loans, but now retain just 3%.
The sample size was too small to report on individual mutual societies (see the table, below), but we can say that as a group, credit unions have the highest overall satisfaction scores (81%, compared with the banks’ 63%). Of the institutions with an adequate sample size to report on individually, ME Bank has the most satisfied customers, followed by other second-tier banks ING Direct and Bankwest.
“ME Bank was the most upfront and transparent home loan lender, with clear information about its rates, which are the same as the ‘comparison rate’,” said one respondent. “All other Australian banks I researched use a very confusing and complex array of products and ‘arrangements’ and almost hide the comparison rate.”
Banks have dramatically lower scores than credit unions for interest rates, annual fees and tardiness in passing on the RBA’s interest rate cuts to borrowers. “Banks are quick to raise interest rates but slow in passing on any reductions, if at all,” said one survey respondent. Another was dissatisfied with “a sudden imposition three years ago of monthly account-keeping fees on the free savings account that came with my loan, with the bank insisting they reserved the right to charge fees – in the fine print”.
Nevertheless, banks retain the lion’s share – more than 80% – of the home loan market among survey respondents. Commonwealth Bank is the most widely used institution for home loans, with about one in five respondents borrowing from Australia’s biggest bank, and about the same number using it for everyday personal banking.