Pay no bank fees? It's as easy as CBA
David Potts, Sun Herald, 5th of March 2006
David Potts's survival guide to frugal banking.
HERE'S an idea for the ultimate TV reality show: get contestants to go for a year without paying a single bank fee.
Sound riveting? It might not be Survivor, but considering there are 102 different fees imposed by banks, it must still rank up there with the ultimate challenge.
The 102 obstacles, found by research group Cannex, range from taking cash out or asking for a statement at a branch - wonder what it's there for? - to making a deposit at an ATM.
So, is avoiding any fee for a year impossible? I'm going to make this even harder by including only the big four banks. Here goes.
Every Day A Fee
Just to prove this isn't a forlorn quest, I'm starting with the most fee-infested area: the transaction or savings account. This is probably the one where you get your salary paid in, is linked to ATMs and might have a cheque facility.
We can move quickly because three of the big four don't have a fee-free account - there's at least a monthly charge.
Well, not quite. If you're on any sort of government pension, all four have basic accounts with no monthly fee. But that seems like cheating and, besides, there's a catch. There'll be a fee if you use some other bank's ATM.
So this leaves the Commonwealth as the only bank that offers a fee-free transaction account for the masses.
But that's its Ezy Action Account, so you have to do your shopping, or at least your banking, at Woolies.
Still, there's no limit on how many transactions you can have if you play by the rules. Which is to do everything at the checkout.
Otherwise you're hit if you use an ATM (50 cents a go, or $1.50 at another bank's), Eftpos anywhere but Woolies (50 cents), go into a branch (50 cents) or write a cheque (50 cents).
Phew! We've cleared the first hurdle. After all, you're not forced to shop at Woolies if you don't want to. Just pretend it's a giant ATM. A fresh food ATM even.
And did I mention credit unions and building societies don't as a rule charge monthly fees?
Holes In The Wallet
So to the second-hardest hurdle. Notice how ATMs feature prominently wherever there's a fee or three.
One of the biggest criticisms of the banks, that they charge $1.50 to $2 for using the wrong ATM, is in my view also the unfairest. Sorry, but I can't see what's wrong with the banks discouraging you from using somebody else's ATM. Why should a business give a rival a free kick?
Besides, if you're prepared to take the hint, you'll see you shouldn't be using an ATM at all. That's because a cash out Eftpos withdrawal is, for most accounts, cheaper.
So stick to your own bank, keep a track of how many withdrawals you've already made and the ATM will be free.
The only hard part is keeping track, which you need to do if you're not in the Commonwealth/Woolies account. Remember withdrawals include Eftpos, ATM, BPay and direct-debit payments.
A way around this is to do as much as you can in one Eftpos transaction, including taking some cash out.
Credit Before It's Due
Better still, do something the banks will hate you for.
I knew you'd like that. It's using your credit card for all your purchases. It usually comes with a bonus interest-free period, too.
So long as you remember to pay by the due date, there won't be a single fee anywhere.
One day late, however, will cost at least $25 in a late payment fee. It gets worse. Your month's spending will also be treated as a cash advance instead, so you'll be paying a high interest rate as well. If the interest puts you over your credit limit, there's another $25 over-your-limit fee. You're right, it really is the limit.
Anyway, you must have the right credit card to begin with, so avoid one with an annual fee.
Once fee-paying cards had a lower interest rate, but that's no longer the case.
You can get fee-free cards with low rates too. The standouts would have to be BankWest, which is also offering a honeymoon rate of zero for the first four months; Virgin Money, with a six-month honeymoon; and Wizard's Clear Advantage. All three have rates in the 12 per cent range. Other credit cards are 15 or more.
Line up online
Ah, now the going's easy. Don't use your transaction account if you've got any savings because there are much better offers around.
BankWest pays a flat 6 per cent on its online account, which is at call, no matter how much you have in it. You can't pay bills or anything from it, but then you can link it to your normal bank account.
Better still, if you've got spare cash, maybe you could buy shares in your bank. For a start, you'll get a yield of about 4.5 per cent from the twice-yearly dividend.
This is better than it looks because it will be franked, bringing a 30 per cent tax break.
And get this. One of the perks of being a shareholder is that the banks will waive fees on transaction accounts and give you a discount of up to 0.5 per cent on mortgages. So not only can you avoid fees you might even learn to love the banks.
Five Follies
- Choosing the wrong bank transaction account for your needs. Cost: About $150 to $200 a year, says the Australian Consumers Association.
- Using another bank's ATM. Cost: At $1.50 to $2 a pop, use the wrong ATM once a week and it'll cost up to $104 a year.
- Using eftpos every time you buy something after you've reached your free transactions limit. Cost: At 50 cents each time, five transactions too many a week would cost $130 a year.
- Incurring a dishonour fee for a bounced cheque or direct debit payment and then being charged an overdrawn fee. Cost: $50.
- Missing the deadline for the minimum monthly payment on a credit card. Cost: $25 plus interest.
