Big Four vs Credit Unions, why aren’t Aussies making the switch?

Big Four vs Credit Unions, why aren’t Aussies making the switch?

Monthly data from banking regulator APRA shows a domination of the loans market, in both credit cards and home loans, by the big four banks.

In fact, the total share of all 19 credit unions listed in the APRA August 2019 release when looking at total resident loans and finance leases, is just 5% of the share held by Australia’s first and largest bank, the Commonwealth Bank.

Compare home loans from Australian credit unions:

 

Home Loan Product

Interest Rate

Comparison rate

Min Deposit*

People's Choice Credit Union

Package Fixed Home Loan (Principal and Interest) (First Home Buyer) 3 Years

2.89%

4.04%

5%

Police Credit Union

Better Home Loan

2.99%

3.04%

20%

Queensland Country Credit Union

Ratesaver Fixed Rate Home Loan 3 Years

2.99%

3.77%

5%

Northern Inland CU

Introductory Home Loan Fixed 3 Years

2.99%

3.97%

20%

Summerland Credit Union

Fixed Rate Home Loan 1 Year

2.99%

4.82%

20%

Data accurate as at 28th October 2019.

*Lenders Mortgage Insurance (LMI), establishment fees, legal fees, admin fees and other associated costs may apply. Check with the lender to determine the additional charges associated with your loan.

Popular credit unions in Australia

Within the credit union space, People’s Choice Credit Union and Credit Union Australia have the greatest market share, with People’s Choice leading the way in credit card lending.

Regardless of their small share, Roy Morgan research shows that in the 6 months leading up to August 2019, just under 90% of building society and credit union customers declared themselves satisfied with their institutions (89.8%).

Less than 77% of customers of the big four banks said the same (76.7%).

Compare credit cards from Australian credit unions:

 

Northern Inland CU

People's Choice Credit Union

QLD Country Credit Union

CUA

Purchase Rate

8.99%

for 6 months then 14%

2.99%

for 6 months then 12.95% or 15.75%

13.2%

11.99%

Cash advance rate

14%

2.99%

for 6 months then 12.95% or 15.75%

13.2%

21.74%

Interest Free Days

55

Up to 62

55

55

Annual Fee

$40

$59

$39

$0

for 12 months then $149

Minimum credit limit

$1k

$1k

$0

$500

Balance Transfer Rate

0%

for 12 months then 14%

2.99%

for 6 months then 12.95%

13.2%

0%

for 13 months then 21.74%

Balance Transfer Fee

$0

$0

$0

$0

So, why aren’t consumers switching from the big four banks?

It could be a case of consumer inertia or a lack of financial awareness, but it seems many consumers opt to stay with the big four for convenience, rather than loyalty. An example of this can be seen in the success of the Dollarmites program, estimated to be worth nearly $10billion.

According to consumer group Choice, the program saw 46% of Australians open their first account with the Commonwealth Bank, and of those Australians, 34% still have that first bank account open.

Data accurate as at 31st October 2019. Get the data here

What is the difference between a credit union and a bank?

Whilst banks and credit unions are both recognised as Authorised Deposit-taking Institutions (ADIs) under the law, they do have their differences.

Owned by members

Banks are corporations operating to achieve a profit to benefit their shareholders and therefore have a responsibility to deliver profits back to investors.

Credit unions, on the other hand, are owned by their customers. This means they are able to reinvest in their members and the credit union’s operations, rather than delivering those profits to investors. Credit unions, building societies and mutual banks are all customer-owned, and therefore have a responsibility to their customers first.

According to Roy Morgan research, building societies had the highest customer satisfaction rating as of May 2015 (93.8%), followed by mutual banks (92%) and credit unions (90%).

Community-focused

Credit unions lead the way when it comes to community support and involvement with local projects. Their customer focus ties credit union staff and their members closer together, and allows them to focus on issues that directly impact the communities they support.

People’s Choice Credit Union, for example, are Australia’s first financial institution to be accredited as a White Ribbon Workplace, as they focus on training, policies and support to help break the cycle of domestic violence.

According to their recent Annual Report, they also contributed 4.7% of their pre-tax profit in the last financial year - six times more than the 0.72% average contribution - to corporate community investment.

However, the big banks’ contributions, and their ability to provide larger funding opportunities to communities, cannot be forgotten.

NAB, for example, has provided $250 million in microfinance loans to low income Australians since 2003, and ANZ offers grants up to $15,000 to help regional Australians build vibrant, sustainable communities.

Which bank or credit union is best for you?

The best bank or credit union for you will always depend on your financial situation, the product you are looking for, and the reason why you need a loan in the first place.

Whilst there is no “best” credit union to suit everyone, you can find the best credit union by comparing the following features:

  • Low interest rate: How low is the interest rate of the loan you are applying for?
  • Comparison rate: Check the comparison rate to get a better idea of the total cost
  • Fees: Check if ongoing, establishment, legal and other fees are charged
  • Promotional deals: Do they have any bundles or promotions available?
  • Bonus features: Do they offer offset accounts, redraws or other extras?

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How can I close an ANZ Bank account from overseas?

There are two ways you can close your ANZ Bank account from overseas:

  • Call +64 4 472 7123 (toll charges apply)
  • Send a bank mail request via ANZ internet banking

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Do you need a bank account to sell on eBay?

You don’t need a bank account to sell on eBay. But if you don’t have a bank account, you must provide either a credit card or debit card.

How do you transfer money from PayPal to a bank account?

Transferring money from PayPal to an Australian bank account is simple. Just follow these three steps:

  • Go to your Wallet
  • Click ‘Transfer Money’
  • Follow the instructions

The money will take three to seven business days to reach your bank account.

Once you’ve made the transfer request, it can’t be withdrawn.

How do I open a bank account for a baby?

If you’ve just welcome a new baby into the world, congratulations. Opening a bank account for your child can be a wonderful first gift.

Before you can open your child an account, you’ll need to have a birth certificate or passport for your baby.

As the parent or guardian, you’ll also be listed as a joint holder on the account. This means you’ll need to have proof of your identification and address (a driver’s licence, passport, birth certificate or Medicare Card).

Many banks and credit unions offer baby banks accounts. Usually, you can apply online; otherwise you can head into a local branch or office with your documents.

Can you get a payday loan without a bank account?

Yes. Some payday lenders are willing to transfer loans to prepaid debit cards instead of bank accounts.

Can British expats still open bank accounts?

As a British expat, you can open an Australian bank account, and you can apply for an account the same ways an Aussie would. You can even open an account online from the UK prior to relocating.

If you’re overseas, the bank you choose to open an account with may call you to provide you with our new account details beforehand. You can then have your ID verified within a branch once you’ve arrived.

And if you’re already living down under, the following list outlines the types of information required by most banks when opening an Australian bank account.

  • Australian residential address
  • Tax file number (TFN) or a TFN exemption
  • Identification (this can be your passport)

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

Can you open another account at the same bank?

Yes, you can open another account at the same bank if you already have an account there, but some banks place a limit on how many specific accounts you can open.

Generally, though, it is possible to have more than one everyday account, one personal account and one joint account, or have different types of accounts – such as a transaction account and a savings account.

Keep in mind that some bank accounts come with fees, so you could be charged twice for having two types of the same account at the same bank.

Also, if you have more than one high-interest transaction account at the same bank, only one account will be able to earn the highest rate of interest.

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.

Do you need a bank account to get a credit card?

To get a credit card, you need to show proof of income, which will almost certainly require you to have a bank account.

How do you open a bank account in Australia?

Opening a bank account in Australia is usually a straightforward process. Some banks give you the option of opening an account online, while others require you to visit a branch.

Different bank accounts offer different features, so it’s best to compare your options to find one that suits you.

All banks require you to pass an identity check to open a bank account. Australia uses the 100-point identification system, which means you’ll need to show a number of forms of ID that, together, add up to 100 points.

Common ID types include a driver’s licence, passport, Australian visa in a foreign passport, and Australian Medicare card. You’ll find out what types of ID are accepted when you go through the sign-up process online or at a branch.

Once your account is open, you’ll be given or sent a debit card that you can use to make purchases and withdraw money from your account.

How do I open a new bank account?

There are a number of ways to open a new bank account – online, over the phone or in the branch. The trick is to decide what type of bank account you want beforehand.

It might sound like a simple enough task, but there are literally hundreds of bank accounts to choose from. And each offer their own banking features and benefits.

A comparison site like RateCity can help you work out what bank account product matches your needs.

Once you’ve made up your mind what you want, it’s advisable to have the following information ready for the application process.

  • A couple of forms of identification (such as driver’s licence, Medicare card, passport)
  • Tax file number
  • Residential address, contact phone number and email (though email is not essential)

Can you open a bank account at 16?

Yes, you can open a bank account at 16, or even younger. If you’re 13 or under, you will probably need a parent to accompany you to a branch.