Bank satisfaction survey 2010

The Big Four again rank bottom for customer satisfaction, but we found they are quite open to giving discounted rates - when asked.
 
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01 .Negotiate a better deal

Thumbs upApproach your bank for a better deal - and chances are they'll oblige. That's what our survey of more than 2000 members concluded. Roughly a third of transaction account and home loan customers were proactive in asking their financial institution for a better rate, and the majority of them got it. One in 10 of those who convinced their bank to give them an interest rate reduction, scored between a 1%-2% discount.

The Big Four banks again ranked bottom for customer satisfaction, while building society and credit union customers fared well. It’s encouraging to see greater competition in home loans, with two smaller banks and credit unions coming top for home loan satisfaction. While switching products may take time and effort, just calling your bank is much less onerous. More often than not, you’ll be rewarded with a large saving in fees and interest rates. 

What we found

  • Commonwealth (CBA) rated best for negotiating with its customers for home loans (just ahead of NAB) and Westpac for transaction accounts.
  • ANZ and Westpac were most likely to give their customers an interest rate reduction on their home loan.
  • ING Direct proved reluctant to negotiate, but claims this is because its rates are already competitive. Members ranked ING second-best for home loan satisfaction, so it rings true.
  • Transaction account customers who sought a better deal were usually offered a better product.

Of the members who received an interest rate reduction from their bank, about two in five got a reduction of up to 0.25%, one in four received between 0.25% and 0.5% and about another one in four got between 0.5%-1%. One in 10 even got between 1%-2%. A 1% interest rate reduction on a $400,000 mortgage will save you more than $75,000 over 25 years; a 0.25% reduction saves you about $20,000. In many cases, you’re simply getting what you’re entitled to anyway, as home loan packages offering interest rate savings of about 0.7% are now available to most borrowers.

Negotiating a better deal

If you’re not happy with your current financial institution, tell them you’re prepared to take your business elsewhere, and where possible quote better products from other institutions. Some members are doing their own research and taking action without even talking with their financial institution. “I can see and compare standard offerings from institutions for myself on the internet,” said one CHOICE member. “You don’t need to contact an organisation’s sales rep to get a better deal – just shop around for more independent advice.”

Many members reported good experiences with personal banking managers. “We deal with ours directly rather than ringing the mortgage centre when we have an issue with any of our banking,” said one. “He solves it promptly and smoothly, whereas the mortgage centre seems to be useless and lacks internal communication.”
Did you ask for a better deal?
Some institutions are being pro-active. According to one customer, “ANZ contacts me every year to check whether my current banking arrangements are satisfactory, and if not whether they can make them more advantageous. I find this service very useful.”
A few ING Direct customers told us that ING did not negotiate with them when they asked for a better deal for their home loan. ING Direct told CHOICE its home loan offers are already competitive and all discounts clearly published. Members obviously agree, ranking ING Direct the second-best institution for home loan satisfaction.

 
 

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Negotiating interest rates Ask for a better deal when your situation changes or if you’re still paying the full standard variable rate. You may be much better off with a banking package that provides a reduced interest rate. Anecdotal evidence shows that non-bank lenders in particular are willing to negotiate on interest rates.

Home loan packages About two in three members with a mortgage have a home loan package. But there can be high fees; about one in three surveyed pay between $301-$400 per year, and less than one in five receive the package for free. Members with mortgages through credit unions are much more likely not to pay anything for their package; in fact, only every second credit union customer pays a package fee. More than half of our members with a home loan package believe it’s good value, but one in five feels it’s not.

Consider basic variable loans, too. Many now come with features that were once only available with a standard variable rate, such as a redraw facility.

Early repayment fees One major drawback with switching your home loan is the high cost involved. Many have an early repayment fee charged up to the first five years, which can be more than $5000 on a $250,000 loan. About one in three members surveyed say early repayment fees on their home loan are either somewhat or extremely high; about one in five believe they’re about right, and only one in 10 feels they are somewhat or extremely low.

Half of the survey participants who have a home loan with a non-bank lender say their early repayment fees are somewhat or extremely high – a view shared by just under one in three participants who had their home loan with a bank, and about one in 10 who had theirs with a credit union.
home-loans-bigger
 Source: CHOICE member banking survey of 2170 respondents, July/August 2010. We only used the results where we had at least 30 responses. Scores were rounded to the nearest whole number.
No monthly fees If you have a transaction account  that charges you a monthly fee, contact your financial institution right away. Many now have an account without a monthly fee, though they may require a monthly deposit such as your salary.

A number of Bankwest customers commented positively about that institution offering them a better deal. “A customer with a Lite transaction account with a monthly fee who has their salary paid into this account (minimum $2000) could be offered a Hero or Zero account,” a Bankwest spokesperson told CHOICE. “Both accounts require you to have your salary paid into your account and offer unlimited electronic transactions without a monthly fee in return. On top of that, Hero offers 5% up to balances of $5000 and can be accessed with a debit card or electronically, and Zero is a traditional transaction account offering free transactions and no ATM fees for a large range of ATM networks (10,000 ATMs nationally).”

Penalty fees Last year saw many banks and other institutions cutting or removing penalty fees, yet more than one in three members surveyed were charged a penalty fee at least once in the past 12 months. This was much higher for banks than building societies or credit unions. About one in 10 participants has been charged penalty fees three or more times; again, this was much higher for bank customers.

Switching bank accounts Fewer than one in 10 participants said they would be likely to switch their transaction account in the next 12 months. The hassles involved – such as changing all your direct debits and credits – hold many people back from switching. One in four participants said they would be more likely to switch if they could keep the same account number (in the same way you can keep your mobile phone number when you switch network carriers).

Another issue is setting up new passwords and PINs. “I’ve finally memorised my full credit card number, PIN and two passwords/codes – it would be too hard to reset all these,” said one member.

Savings accounts Before switching your savings account, give your current provider one last chance to match the offer of the other institution. And if your current savings account has a higher introductory rate for new customers, ask them to give that to you as well. Even if you don’t get this rate for your existing funds, you may get it for any new deposits.

Credit cards If you’re paying interest on your card, check with your bank that you have the lowest rate possible. You can also ask for your annual fee to be waived before it comes due.
transaction-accounts-bigger 
Source: CHOICE member banking survey of 2170 respondents, July/August 2010. We only used the results where we had at least 30 responses. Scores were rounded to the nearest whole number.

Transaction accounts

The introduction of low-fee transaction accounts last year seems to have had a positive effect: the great majority of institutions achieved higher satisfaction scores than last year.

  • Teachers Credit Union had the highest overall satisfaction rating for transaction accounts, and also scored the highest satisfaction rating for customer service, product range, internet and phone banking facilities. Teachers also improved its ATM access score after NAB joined the RediATMs network, giving credit union customers access to free transactions at the combined 3000+ Redi and NAB ATMs nationwide.
  • Banks came bottom of the table, with the lowest overall satisfaction recorded by Westpac. NAB, which came bottom last year, deservedly improved its ranking, becoming the first bank to cut penalty fees and introducing a low-fee bank account that was judged worthy of a CHOICE Award.

Savings accounts

As with transaction accounts, Teachers Credit Union scored highest overall, with a very impressive 90%. Teachers also scored highest for customer service and internet banking facilities. CBA rated lowest for overall satisfaction, slightly behind Westpac and ANZ.

Credit cards

Compared with 2009, the overall satisfaction was lower for all institutions. One reason could include cuts to rewards program points, such as changes to the Qantas program in early 2009. One survey respondent was unhappy with the “compulsory switch to Qantas Frequent Flyer program – which I will never use”.

Interest rates were another reason for dissatisfaction among survey participants as banks increased their interest rate margins. ”My ‘low rate’ credit card interest rate seems to increase on a monthly basis from its original position of just below 10%,” said one member.

Credit unions had the highest overall satisfaction rating, the highest ratings for annual fees, penalty fees, interest rates, foreign exchange and overseas fees, as well as for calculating and applying interest when customers don’t pay on time or in full. Amex had by far the highest satisfaction score for reward programs.

Home loans

Since 2009, non-bank lenders recorded an average increase overall, with banks now rating below non-bank lenders. Members Equity Bank home loan customers were the most satisfied, scoring highest for fairness in passing on Reserve Bank interest rate increases or decreases, variable interest rates and annual fees.

Close behind were credit unions and ING Direct, the second-highest-rating institution. The lowest overall satisfaction score recorded was for Westpac, slightly behind CBA, NAB and ANZ. Westpac’s large increase in interest rates above the Reserve Bank’s rate in December last year would likely be one key explanation for this.

ratings
Source: CHOICE member banking survey of 2170 respondents, July/August 2010. We did not ask participants for an overall score for their institution – the average result is based on the scores for the four different products. We only used the results where we had at least 30 responses. Scores were rounded to the nearest whole number. Some institutions were only scored for one product.
Table notes na Not applicable
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