There once was a time when most banks charged an account keeping fee – meaning you had to pay the bank for holding on to your money! Meanwhile, the banks were using your hard-earned cash to make some very tidy profits through loans, investing and other complicated banking stuff.
This never sat well with the money gurus at CHOICE, and fortunately the era of high banking fees has been winding down. We like to believe we had something do with that, since CHOICE has been campaigning against unfair bank fees for a long time.
These days, it's not hard to find a bank that doesn't charge a monthly fee – and it's not hard to find out which ones do and which ones don't.
Simply go to the bank's website and access its fee schedule. Since you're likely to get hit with some form of a Product Disclosure Statement (PDS), be prepared to be confused. You will likely have to scroll around a bit, but the bank is obliged to disclose all the details.
If you're still not sure after checking the PDS, give the bank a call and ask how well its policies line up with our CHOICE Banking Checklist.
Bank penalty fees, also known as exception fees, aren't as easy to avoid as account keeping fees, but they too have come down in recent years.
We think an overdrawn account charge should be no more than $5, and banks should make a few tries to complete the transaction before applying a penalty. We've always argued that banks should not be allowed to charge customers more than it costs to fix the problem.
To find out what penalty charges you could face, check the fee schedule for your account type by searching on your bank's website or asking them in person.
The best bank accounts should stand up to the CHOICE Banking Checklist:
- No-monthly-fees with no conditions attached, such as a minimum monthly deposit or balance.
- Unlimited, unconditional free own-bank ATM and EFTPOS transactions.
- A range of other unlimited transactions at no cost, including direct debit or credit, phone and internet banking, BPAY service and over-the-counter service if available.
- Transaction accounts should be linkable to a savings account with a reasonable interest rate (the arrangement is sometimes called a cash management account), and you should be able to transfer money back and forth between the accounts via the internet as often as you like at no charge.
Many savings accounts offer a high introductory rate (or teaser rate) and then drop to a standard rate well below the market leaders. In the long term, a high standard rate will outperform any introductory offer, and the hassle of moving money around often puts people off switching once they have settled on a product.
Therefore, in most cases, you should choose an account with the highest standard rate.
However, there's nothing stopping investors from moving their money to take advantage of the leading rates and then switching again when a better deal comes along.
CHOICE tested this approach and found that taking short-term advantage of teaser rates can lead to significant gains over time, but you'll have to be a switched-on and hands-on bank customer.