Does your bank deserve your custom?

By LESLEY GREGORY

It’s been said that you’re more likely to change your spouse than your bank. But, as you run the ruler over your personal finances, ask yourself whether your bank has been doing the right thing by you.

There’s plenty of research that shows we suffer from “inertia” when it comes to switching financial services, even though this could save us – or earn us – significant sums.

Think about it: When interest rates fall, does your bank pass on the full extent of those rate cuts so your mortgage is cheaper? When interest rates rise, do you get the full benefit with a commensurately higher rate on your savings? Have you been stung by the auto-renewal of a term deposit onto a below-par rate?

I’d be prepared to wager that the rate on your credit card (or cards) hasn’t fallen anywhere near as far as official interest rates in recent years. Some cards are still charging around 18 per cent, even though official interest rates are at rock bottom.

That credit card is probably with the same bank as your mortgage, and your savings account, and your debit card … need I go on? That’s part of the problem: banks and other financial service providers know the more products you have with them, the less likely it is you’ll shop around.

In Australia, the Productivity Commission has identified “bundling” as an impediment to competition. Another study found that loyal, existing borrowers were paying interest rates on average of 32 basis points higher than those for new borrowers – a “loyalty tax” worth billions of dollars in additional profits to banks.

It probably wasn’t so much that these borrowers were feeling “loyalty” but more likely that they were worried switching would be costly or difficult, or would just plain mess up their direct debits. Or maybe it was just a case of “better the devil you know”.

So, make a list and check it twice:

What are you top three needs from a bank?

Are you a borrower or a saver? Is a bank’s home loan rate or savings rate more important to you? Think about what really matters to you.

Is a physical location important?

If you never go into a bank these days, why do you feel compelled to stick your bricks-and-mortar institution? Make sure to check out the offerings of online-only banks.

How important is customer service?

I earn a good interest rate on my savings with an online bank, but heaven forbid I need to talk to someone on a weekend …

Compare rates

Remember that “loyalty tax”? Keep up to date with changing rates and remember that you can haggle with your existing bank – get them to match new offers.

Compare fees

That includes monthly “service” fees, ATM fees and charges for overdrawing or declined payments.

Compare your values

I can’t begin to count the number of banking scandals in recent years. At what point would you take your money away from a big bank and put it somewhere like a smaller bank or credit union?