Smart shoppers could save big on bank fees

June 2013

Smart shoppers could save big on bank fees

CANSTAR releases deposit accounts star ratings report today, researching 83 deposit accounts across 14 institutions.

Being in the wrong type of account could cost consumers hundreds in extra fees
Important to match bank account to spending habits
Excellent value available in each transaction category

Setting aside time to research their transaction account options could save shoppers up to hundreds of dollars each year in unnecessary fees, says financial services research firm CANSTAR. For around an hour of effort, that’s a great return on investment.

“We are in a low interest environment and consumers don’t expect to get a high rate of return on their cash at the moment,” says CANSTAR General Manager – New Zealand, Derek Bonnar. “That does mean that fees can potentially take a higher proportion of that return though. Every financial institution will have a product to suit each customer’s transaction needs, but many of us have a set-and-forget mentality when it comes to bank accounts. We don’t tend to change our bank account structure as often as we change our spending and saving habits. This can lead to us paying out a lot of money in unnecessary fees.”

CANSTAR’s star ratings methodology divides account-users into savers or transactors and within that into those who operate primarily online and those who do not. The six transaction profiles assessed are as follows:

Online saver

Incentive saver

Full access saver

Electronic transactor

High transactor

Low transactor

When it comes to transaction accounts, CANSTAR have calculated the minimum, maximum and average fees that consumers could attract, depending on their choice of product:

Low transactor (an average of 10 transactions per month)

Minimum account fees per year - $4.75

Maximum account fees per year - $482.64

Average account fees per year - $114.52

High transactor (an average of 40 transactions per month)

Minimum account fees per year - $19.08

Maximum account fees per year - $1,658.11

Average account fees per year - $287.62

“Quite often consumers may have opened an account many years ago but may not have reviewed it since, meaning it may not match their needs anymore,” observes Mr Bonnar. “As an example, online banking has absolutely taken off. Consumers paying perhaps a ten dollar monthly fee for an account that has over-the-counter functionality could decide, when they stop to think about it, that’s it’s a service they really don’t need. On the flip side, someone deciding to use their savings account as a transaction account instead could end up paying more than they bargained for.”

Mr Bonnar encourages consumers not to be put off by the hassle of changing financial institutions. “Like any other business, banks don’t want to lose customers; it’s a lot cheaper for them to keep an existing customer than attract a new one,” he says. “So research your options, decide what you need and then phone your existing financial instiution. You will probably find that they have a product to suit your needs. The important thing is to do the research and get yourself into a product that matches your spending and savings habits. It’s something that can potentially save you a lot of money.”

CANSTAR has taken the hard work out of finding a good-value deposit account with their deposit account star ratings report assessing 83 deposit accounts across 14 institutions. The five star-rated products are listed on the page following and more infomration can be found at www.canstar.co.nz.

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