Customer fee gouge rolls on as banks make massive profits
News Corp Australia Network August 21, 2016 12:00am
Sophie Elsworth, Personal finance writer
AUSTRALIANS are now paying banks a record $34 million a day in fees.
Official data shows customers were slugged more than $12.5 billion in charges in the past year, up $425 million on 2014 levels.
The Reserve Bank of Australia figures reveal about $4.3 billion was forked over by households and $8.1 billion by businesses.
From ATM costs to home loan application fees, annual fees on credit cards and penalties for late payment charges on various banking products, customers are getting gouged if they don’t pay close attention to their accounts costs and stick to the guidelines.
While the nation’s whopping credit card debt remains stable at $52.2 billion, fee income is anything but.
Charges for using plastic rose 6.6 per cent 6.6 per cent to $1.5 billion, Reserve Bank of Australia figures show. Credit cards — which already have astronic interest rates that are defying falls in the cash rate — are now the single largest source of fees from households.
Charges on home loans climbed by 2.7 per cent to $1.25 billion and personal loans also by 2.7 per cent to $376 million.
Analysis by financial comparison website Finder.com.au shows some annual fees on credit cards are slugging customers as much as $700 per year and often have complex rewards programs attached as a tool to lure in consumers.
There are fee-free credit card options but they usually hit customers in other ways by charging excessive interest rates of around 17 per cent if the customer fails to pay off the balance in full each month.
Consumer watchdog Choice’s spokesman Tom Godfrey said it was concerning each Aussie household continued to fork out hundreds of dollars a year just to do their banking.
“It’s staggering to think that last year the average household paid $468 in bank fees with credit card fees rising the fastest, up from 5.9 per cent in 2014 to 6.6 per cent in 2015,’’ he said.
“Credit card are already too toxic for too many Australians with one in five living on them to get through to payday and sky-high interest rates are out of step with the rest of the lending market.”
Other hefty fees include “fixed rate lock in fees” which are as high as $750 if you lock in a fixed rate deal and want to secure the rate prior to settlement in case it changes.
ATM fees which were introduced in 2009 have also shown no sign of disappearing — they usually range from $1.50 to $3 per withdrawal which can cost as much as $156 per year if one weekly withdrawal is made.
Debate still surrounds whether there should be a banking Royal Commission — it was a key promise by Opposition Leader Bill Shorten but has been strongly opposed by Turnbull Government.
Instead the PM has promised to meet with bank bosses annually and restore funding to the existing regulator, the Australian Securities and Investments Commission.
Earlier this month the nation’s largest bank, the Commonwealth Bank, posted its highest-ever full-year profit, growing by three per cent to $9.45 billion in the year to June.
Just this week the bank’s chief executive officer Ian Narev was crowned the nation’s highest paid big four banker, raking in $12.3 million in the 2015/16 financial year.
Only one week earlier the lender copped extensive criticism for only passing on half of this month’s RBA cut to its mortgage customers within just minutes of the board making its decision to drop the cash rate.
Nearly every other lender in the market followed suit and failed to pass on the cut in full.
But the Australian Bankers’ Association’s chief executive officer Steven Munchenberg said a lot of the big banks’ profits goes back into the community through corporate tax and to shareholders — he said it often doesn’t remain in their own pockets.
“There’s an attitude or view that the bank hangs onto some of that profit when it’s actually distributed back into the community,’’ he said.
“As far as I know we are the only industry that offers any products for free.
“We’ve seen an increase in the number of fee-free accounts.”
Munchenberg blames the growth in fee expenditure driven by population growth and more people using banking products.
But finder.com.au’s spokeswoman Bessie Hassan said the onus is on Australians to stay on top of their bank fees.
“Don’t pay the lazy tax — jump online, call your bank or pop into your local branch to negotiate the waiving, or reduction off fees,’’ she said.
“Use your loyalty as leverage, if they’re not willing to budge, it may be time to switch.”
BIG FOUR BANKS’ PROFITS
*ANZ $7.2 billion in the 2014/15 financial year
*CBA $9.45 billion in 2015/16 financial year
*NAB $6.3 billion in the 2014/15 financial year
*Westpac $8.01 billion in the 2014/15 financial year