How to ditch the big banks
AS AUSTRALIA grapples with revelations its major banks have done the dirty on them, many consumers have been left wondering if it's time to make the switch.
The banking royal commission - which is examining misconduct of NAB, CommBank, ANZ, Westpac, and other providers - has exposed multiple financial abuses that have been carried out by providers against Australian consumers.
The latest banking scandal arose yesterday when the Commonwealth Bank admitted losing customer records for almost 20 million accounts over 16 years after failing to track down tapes on which the information was stored.
The tapes held customer names, addresses, account numbers and transaction details for 19.3 million accounts from 2000 to early 2016, but did not contain passwords or PINS which could be used to enable account fraud, CBA said in a statement.
"Ongoing monitoring of accounts by CBA confirms customers do not need to take any action," the lender said today.
It has capped a troublesome few weeks for the big four banks following revelations that CommBank has been charging dead people fees for a decade and several NAB staff members have accepted cash bribes - prompting many customers to want to take their business elsewhere.
But how complicated is it to ditch your bank?
Finder.com.au money expert Bessie Hassan told news.com.au that "one of the biggest barriers to switching is the perceived effort involved, but it's not rocket science, and switching to a new bank could definitely be worth your while".
The biggest pro to making the switch "is usually in the savings, followed by an improved customer or online banking experience", Ms Hassan said. The cons include: "losing transaction history, having to reset your direct debits - including monthly Netflix and mobile phone plan payments - and changing payment details with employer".
"Do consider that some products, such as fixed home loans, have exit fees," she said. "Break costs vary with each lender but generally depend on the following: how many years left, borrower's fixed rate and lender's current fixed rate."
There are several other factors that also need to be considered before switching providers such as account keeping fees and whether or not they have 24/7 online support and sufficient customer service options, according to Ms Hassan. She advised that Australians "shouldn't make their decisions based on a product's interest rate alone".
"Factor in things like customer service, online banking, and consider the smaller players as well as the more established brands as they may offer competitive, yet lesser known, products," she said.
"The first thing you should do is have a conversation with your current provider to see if they'll offer a better rate. In this case, loyalty may work in your favour as you can use it to justify why you deserve a more competitive price.
"Also, remember, it usually costs a lot more to acquire new customers than to keep existing ones, so chances are, they're going to want to keep you happy.
"In most cases, your bank will be willing to grant you a better interest rate if you can demonstrate that you've done your homework."
Ms Hassan said existing customers should remind their banking providers of their "good repayment history and the length of time you've been banking with them".
"Chances are they'll issue a discount," she said.
"In some cases they may reward you in a different way, such as waive fees instead - either way, this is a favourable outcome and more money for you to spend on the things you love.
"However, if your bank isn't willing to give you a better rate, it may be time to take your business elsewhere."
'GET ME OUT OF HERE'
Those who want out immediately, perhaps because of unsatisfactory interest rates or fees, poor customer service, or if the current product no longer meets your needs, should "head online and compare products to see what other providers are offering".
"[It's] so you can get a feel for market prices and rates," Ms Hassan said.
"Review your existing product to see if there are any fees you'll incur from closing your account and opening a new one.
"For example, if your switching home loans, you may need to pay an early termination fee as well as an application fee for the new loan. It's up to you to decide if the switching costs are worth it."
.@TurnbullMalcolm is shocked over revelations about banks and financial planners unearthed by the royal commission.— Sky News Australia (@SkyNewsAust) April 28, 2018
'The fundamental problem is a failure in the banking and financial service sector who are not putting the customer first.'
MORE: https://t.co/uNWIq1lUHQ pic.twitter.com/PnneguETBO
The retirement savings of working people should not be used to prop organisations that house rotten, corrupt and unethical behaviours like those revealed over the past weeks at the Banking Royal Commission.— Australian Unions (@unionsaustralia) April 26, 2018
It's important to close the old bank account even if there are no funds left over as some banks charge inactivity fees which could set you back.
"Always call to confirm that your account has been closed," Ms Hassan said.
In January 2018, a finder.com.au survey of 2306 Australians found 44 per cent of them would switch banks for a better return on their savings.
Ms Hassan's best tip for getting on top of finances was "don't pay the 'lazy tax' by missing out on the savings that typically come with shopping around".
"Particularly with home loan interest rates - switching to a rate that is just 10 basis points lower could save you over $8000 over the life of your loan - based on current Australian mortgage size of $390,000 and standard variable home loan rate," she said.
But there's no "one size fits all" option when it comes to selecting from a range of big banks, small banks and credit unions, according to Ms Hassan.
"The consumer remains king - increased competition with the introduction of small and online providers is driving down prices while we're increasingly seeing product improvements and innovations," she said.
"Although comparing can be time consuming, it's almost always worth the effort for potential savings."