There is a common perception among the public that bank fees have been increasing. Is this true? It depends on what fees you are talking about. There is a wide variation among banking sectors, such savings accounts, loans, and credit cards.
In a report prepared by the Australian Bankers’ Association (ABA) in May 2006, there is a claim that fees have actually fallen in real terms. The suggestion is that overall fee revenue for the banks has gone up because there has been an increase in banking service volumes, which has outpaced the increase in banking service fee revenue, indicating that the average unit cost to the consumer has fallen.
The ABA report goes on to say that people with low-cost transaction accounts are not paying high fees because there are certain of number of ‘fee-free’ transactions. But some of these accounts have monthly account-keeping fees of $5, which some customers may not regard as low-fee accounts. There also some ‘generic’ basic accounts for eligible low-income earners such as pensioners or students.
According to the report the number of free transactions has been steadily rising. The proportion of accounts offering unlimited free transactions has increased since 2000 from 7 to 24%, and where monthly limits still apply the average free limit has risen from 5.6 to 7.7 transactions per month.
The ABA says the reason for the claimed falling fees in savings accounts is partly due to many customers switching from more expensive options such as branch transactions and cheque accounts to cheaper alternatives such as credit cards, phone and online banking, and direct debits.
But a report by Fujitsu Consulting contradicts the ABA’s claim of lower fees. The research indicates that the average Australian bank accountholder pays over $95 in in account-keeping and transaction fees. This compares unfavorably with Britain that pays around $55, the US, almost $72 and Canada, about $84.50.
The ABA also claims that low-income earners are not disadvantaged by bank fees. But St George Bank has recently tripled its minimum account balance to avoid monthly fees from $1000 to$3000. Denis Orrock, general manager of Infochoice says this too steep at only 0.1% interest. He advises putting the $3000 into a Bankwest account for 12 months with 6.4 % interest. He claims that you would be around $192 better off with Bankwest than with St George, despite an interest rate of 6.4% p.a.
A Reserve Bank of Australia (RBA) article published in May 2004, stated that banks’ fee income from households rose by 15% in 2003, to $3 billion. This was predominantly from credit card fees, which have increased strongly by 38%, which puts in doubt the ABA’s claim that credit cards are low-fee. Fees from housing loans are up by 13%. The RBA did say that low-fee transaction accounts have increased in number, and that there are more fee exempt accounts for students and pensioners.
The Australian Banking Association (ABA) says that banking fees per customer have fallen.
Research by Fujitsu Consulting indicates bank fees in Australia are among the highest in the world.
Online banking has reduced some fees.
Fees from credit cards and housing loans are up.