We weren’t surprised that we couldn’t find an inspiring quote about bank accounts. After all it’s a pretty bland topic however it’s one that we all face and interact with on an almost daily occurrence.
Bank accounts in the modern day are almost unavoidable. Sure there might be a small portion of people still hugging their mattress super tight at night but for the average person, the spoils of their labour will be going into a bank account. In fact banks are so embedded in our society that we sometimes forget their businesses whose primary goal in many cases is to make a profit for shareholders. For this reason we give them an undeservedly high level of trust and then are shocked when they don’t act in the consumer’s best interest as the current Royal Commission is starting to uncover.
The simple reality is that in the digital world we rely on banks for almost every financial interaction we have and pay for the privilege to do so. In 2016 Australians spent $12.5 billion on banking fees equating to the average household spending in excess of $500 per year. At a time when most households are under increasing financial pressure, recouping $500 back in the budget is an outcome worth looking into.
Despite record profit levels continuing in the banking industry the facts are that the level of competition between banks is at an all-time high. As a result the pace of new and improved product features and terms hitting the market is rampant and the informed consumer is well positioned to take advantage of this.
By making smart decisions around who you partner with and how you interact with them, you’ll be able to avoid almost all fees relating to bank accounts.
Bank account fees are so 2010
In this day and age if you’re paying a monthly account keeping fee and fees for transacting you’re with the wrong bank. Last time we looked around 75% of bank accounts no longer charged an ongoing monthly fee. If you are paying a monthly fee, then you’re throwing money away for no good reason.
A quick check of your statement or your bank’s website will confirm one way or another. If there is a fee involved, give your bank a call and get them to tell you about their new products which in all probability don’t have fees. Yes, your bank account number will change and that might be annoying for a bit as you update your pay and direct debit details, but the additional money in your budget over time is a pretty good return for the inconvenience.
If your bank is one of the few who don’t offer free accounts then a quick google search will give you more options than you need on fee-free alternatives. This process will be a little more involved as you’ll need to provide your new bank identification to open an account so it’s on you how important this is. We live by the philosophy that our money is better in our pockets than a bank shareholder’s so naturally we think it’s worth the effort.
Choose the right account for your interaction preferences
Another common area consumers get tripped up is by transaction fees. The most common are withdrawals from non-affiliated bank’s ATMs and face to face withdrawals from online savings accounts. This is easy money for banks and very easy to avoid by being smart with your banking.
Firstly a lot of the major banks are now removing fees for withdrawing from other banks ATMs which means you don’t have to worry about this at all. For those yet to do this or the smaller players, they’ll typically have partnerships with one or more institutions allowing free withdrawals from their partners. Failing that, in an economy that is becoming increasingly cashless you can avoid these charges by using an alternative form of payment such as EFTPOS for any purchases which unless you’re using a credit card, generally won’t have any fees involved.
The other common trap is fees for transacting on savings accounts. Typically you’ll have a transaction account for your everyday use and an associated savings account which has higher levels of interest but restricts the way the account can be used. Banks found out pretty quickly that despite putting restrictions on these products, if they allowed the very same transactions they were restricting then they could make additional revenue by charging a fee for these. A common example is where you have an online savings account where you can make unlimited deposits and withdrawals online however are charged a fee for any face to face, ATM or EFTPOS withdrawals.
The solution for this is simple. Don’t link your direct debit or credit card to this account even if they offer it – if you’ve already done this, remove it – and only withdraw from the account according to the product features such as via telephone or internet banking. Better yet be super disciplined and don’t withdraw from it unless in the most desperate situations. This way you can sit back and watch your savings grow whilst avoiding unnecessary charges.
Convenience can be costly
Direct debit was introduced to support the convenience of consumers not having to remember when everything was due to be paid. However the downsides of this convenience are well known to anyone who’s ever had a timing issue and found themselves with insufficient funds to cover the direct debit payment. For the efforts associated with rectifying this issue your bank will charge a pretty sum somewhere between $5 and $40 to add to the stress of missing your payment in the first place.
So we recommend the use of direct debits with caution, particularly if you work in an industry or for an employer where your pay isn’t always paid at the same time, every time. In this instance, you’d be better to explore other payment options like BPAY or manual transfer that may not be as convenient but will save you money in the long run.
Here’s a few small yet meaningful ways you can avoid unnecessary fees and put more money back in your own pocket. A small investment of time can lead to a large saving of money over time.
Action for the week:
- Set aside 30 minutes, pour yourself a drink and get out your bank statements – are you paying ongoing account, regular transaction or direct debit related fees?
- Talk to your bank to see if they offer alternative options at lower or no cost. Other providers certainly will if they don’t.
- Ensure that the way you’re using your bank accounts are the way they were designed for. If not, change your account or your behaviours to ensure you’re banking in a way that’s best for you and your bottom line.
Banking in today’s world doesn’t have to be overly complex or costly. By partnering with the right bank, finding an account that suits how you’ll use it and by limiting the unnecessary costs that so many people face, you’ll quickly find you can have convenience of a bank account at super low or no cost. More importantly you’ll have more money to play with or to save and continue building towards the financial freedom to live a healthier and fulfilling life.
In our next post we’re going to turn our attention to sleep. Getting the rest and recovery you need is another critical part of leading a healthier life and the best way to do this is when you go to bed each night. Stay tuned for more information on great sleep habits to help you feeling more rested than ever before.
We’d love to hear your thoughts on managing your bank accounts, what has or hasn’t worked for you, and any other comments or questions you have. Please reach out to us at any of our social media channels.