Bank fees still worth billions


Despite a focus on unfair fees in recent years, some banks continue to gouge customers.

Outrageous bank fees


Australia's biggest banks make pretty good use of our money – household and business deposits, interest payments, insurance premiums, the list goes on. 

And it seems to be working out for them. The bigger banks are posting huge profits year after year and have become some of the most profitable financial institutions on the planet.

But as well as using our money to make money, banks big and small also hit us up with fees, and plenty of them.

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Fee frenzy

Australian households paid nearly $4.38 billion collectively in bank fees in 2015, including an average of about $468 per household. In 2017 the figure crept up to $4.5 billion.

For retail bank customers, much of this fee frenzy can be attributed to credit card fees, which was the subject of litigation not so long ago.

But banks also sneak in a range of other fees, such as Commonwealth Bank's $102.50 "regulatory fee", which applies to customers of its Colonial First State FirstWrap Personal Super product and Commonwealth Private, though the bank has reportedly waived it for some customers.

In the lead-up to the banking royal commission that kicked off earlier this year, we asked 2763 CHOICE members about their biggest gripes with the banks. Unfair fees topped the list.

The fight against bank fees

Law firm Maurice Blackburn filed a class action against ANZ bank in September 2010 on the grounds that its fees amounted to penalties the bank wasn't authorised to charge.

In December 2011, the firm filed class actions against Commonwealth Bank, Westpac, NAB and Citibank on the same grounds, and in early 2012 extended its reach to Bankwest and Westpac subsidiaries St. George and BankSA.

According to Maurice Blackburn, more than 185,000 bank customers joined the class action in pursuit of a claim of about $240 million.

At the time, fees charged by the banks ranged from $7 to $60, with many charging $30 or $35 for everyday banking mishaps such as insufficient funds.

It seemed like the lawyers had a fair point: banks may be justified in charging whatever it costs to deal with insufficient funds or other customer infractions, but should they be allowed to charge penalties above and beyond their costs, as if they're law enforcement agencies?

In 2014, Federal Court Justice Michelle Gordon ruled that credit card late-payment fees were unlawful penalties if they exceeded the true cost to ANZ of handling late payments. However, dishonour and over-the-limit fees weren't deemed unlawful.

Justice Gordon estimated the cost of handling late payments at about 50 cents, a far cry from the many multiples of that figure banks were charging at the time.

Unfortunately the consumer win, such as it was, was short-lived: in 2015, the Full Court reversed her decision.

Fed up with fees

CHOICE has been on the bank-fee case for over a decade. Back in 2007 we launched our "Fair Fee" campaign in partnership with the Consumer Action Law Centre, and in May 2009 the Reserve Bank of Australia (RBA) published exception fee data (such as insufficient funds or late payment fees) for the first time.

Our campaign had real momentum, and we kept the pressure on. In July 2009, NAB got rid of penalty fees on transaction accounts, and a number of other banks followed suit in August.

But now, thanks to the royal commission, banks are under the microscope again and collecting all kinds of black marks on their ethical scorecards. So we thought it was time to take a look at who's charging what, and which types of fees continue to inflict the greatest financial pain. 

The hidden costs of credit

Credit card fees are easily the worst of the breed, far outpacing bank account fees. In most cases they've been creeping upwards in recent years.

AVERAGE CREDIT CARD FEES
Average annual fees
2016 $114
2017 $118
2018 $121
 Average late-payment fees
 2016  $16
 2017  $17
 2018  $16
 Average over-limit fees
 2016  $14
 2017  $13
 2018  $14

Late-payment pain

Beyond the averages there are some pretty nasty outliers, especially in the category of late-payment fees for credit cards – the kinds of fees that were temporarily ruled illegitimate in 2014.

Who are the worst of the fee gougers? All Jetstar, Macquarie Bank, Myer and Woolworths credit cards charge a whopping $35 fee each time you make a late payment, making them the costliest cards out there (fee-wise) for late payers.

Account-keeping monthly fees – they still exist!

A central focus of our earlier campaign against unfair bank fees was the abolishment of account-keeping fees, an outrageous practice that's thankfully moved to the fringes.

Imagine it: you have to pay the bank a monthly fee for the privilege of having a savings or cash management account (a kind of hybrid transaction/savings account). Meanwhile the bank is using your money to its own ends and generally paying a paltry interest rate.

Thankfully savings and cash management account-keeping fees are few and far between these days, but they haven't died out altogether.

A handful of these accounts still charge a monthly fee if certain conditions aren't met (like a minimum balance).

Costly transactions

Of the 181 transaction accounts we reviewed, 55 still charge a monthly fee, although meeting certain conditions like minimum deposits often means the charge will be waived.

On the plus side, overall transaction-account fees have declined in recent years, and avoiding them has become easier.

It's also getting easier for consumers to access their own money without getting stung by a fee, thanks to own-bank ATMs, the big four banks dropping their ATM fees entirely and products like the ING Orange Everyday account that will reimburse any ATM charges as long as you deposit at least $1000 a month and use your ING credit or debit card at least five times a month.

If your transaction account charges a monthly fee, deliver an ultimatum to your bank: drop the fee or say so long to my business.

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