The great divide – how COVID is hurting some families and helping others

When it comes to the financial impacts of COVID-19, there are two narratives emerging amongst Australians: those who are being hurt by COVID-19, and those being helped.

For those being hurt, the ramifications may be felt for many years, even decades to come. However, there are some crucial tips that may be able to offer some relief. For those being helped, there are still ways they can use this time to their advantage.

How households finances have been hurt by the pandemic

The latest unemployment figures from the Australian Bureau of Statistics (ABS) show that almost a million Australians (7.4 per cent) are out of work. Meanwhile, 3.5 million Australians are now receiving JobKeeper payments to help keep heads above water.

Those who still need a helping hand have been able to dip into their superannuation, with the latest Australians Taxation Office figures showing 2.75 million unique applications have been approved, totalling $30.2 billion. The average amount withdrawn is $11,750. This in itself may have seriously negative impacts on an individual’s final balance.

In terms of personal debt, 800,000 households have had to pause their mortgage repayments due to hardship, according to the Australian Banking Association. Further, the latest ABS figures show new personal loans increased by $182 million from April to May, up 14.5 per cent month on month.

Tips for families financially hurting due to COVID-19

If you’re struggling to keep on top of your bills, you’re not alone. But it’s not just mortgage holders who have been offered relief by banks. In fact, there are a range of debts and bills that households may be able to request be deferred for hardship reasons.

1. What bills households can take a break from paying right now

Loans banks may defer Bills that may be deferred
Home loan Rent
Car loan Electricity and gas bills
Personal loan Phone/internet bill
Credit card repayments Health insurance
Business loans Memberships and subscriptions

Keep in mind that you will generally need to provide evidence that you are struggling financially with these repayments, such as evidence you’ve lost your main source of income or are now on a reduced income.

Also, remember this is not free money. You will eventually need to pay this back, and if you’ve been accruing interest on your deferred loans, the total cost now may be higher.

If you are in a position to make any repayments, try and pay what you can, even if it’s not the total bill. Further, consider negotiating with your bank or provider. You may be able to switch to a lower cost service.

  • For a full list of hardship relief support offered by your bank, please visit the RateCity Relief page.

2. Reducing the impact of a mortgage repayment pause

If you’ve deferred your home loan repayments, you may be shocked to find that your repayments are potentially higher. This is because your mortgage would still have been accruing interest even while your repayments were paused.

The cost of a repayment pause extension on a $500,000 loan:

Loan balance after the 10-month pause $514,477
Increase in monthly repayment after pause $128
Extra paid over life of loan $12,211

Notes: Based on an owner occupier paying principal and interest on the average rate of 3.43%. Calculations assume a borrower is 5 years into a 30-year loan with a loan balance of $500,000 when they defer for 10 months and that the loan term remains the same. People who are further into their loan may pay less. People who increase their loan term may pay more.

Here are some tips that may help reduce the impact of a mortgage repayment pause:

  • Try and pay off some of your loan during the pause.
  • When the pause finishes, see if you can make extra repayments to catch up.
  • Negotiate a lower interest rate with your bank and if possible, try and put any savings from the rate reduction back into your mortgage.
  • Call an independent financial advisor or a financial counsellor for advice. The National Debt Hotline is: 1800 007 007.

3. Potential alternatives to pausing mortgage repayments:

  • Switch to minimum repayments: customers making higher repayments on their loan may ask their bank to adjust their repayments to the minimum to free up cash.
  • Use your redraw facility: if you are ahead on your repayments you may be able to access them via redraw (fees may be charged).
  • Request a rate cut: variable rate customers can ask their bank to lower their home loan rate. While banks typically don’t allow rate changes for fixed rate customers, if you are in financial stress, it’s still worth asking.
  • Switch to interest-only repayments: many lenders will let you only pay the interest on your loan for a period of time. While it will reduce your monthly repayments in the short term, your interest rate is likely to increase and by not paying down your debt, you will pay more in interest charges over the longer term.
  • Reduce repayments temporarily: instead of going on a full repayment pause, see if you can reduce your repayments. While this can potentially add thousands to your mortgage, it’s likely to be better than going on a full repayment holiday.

If you’re now considering refinancing to a lower-rate home loan, or one that offers more flexibility, you’ll want to ensure you do your research around which loans are the most competitive. Here are some low rate home loans to start you on your refinance journey:

How households have been helped financially by the pandemic

Credit card debt is at record lows, as restrictions on travel have prevented many Australians from spending money and accumulating debt. According to the latest Reserve Bank of Australia figures, in April and May Australians wiped $3.2 billion off debt accruing interest.

And with more Australians at home, bank deposits are on the rise. According to the Australian Prudential Regulation Authority’s data, between April and May Australians had $9.6 billion more in their bank accounts.

For those with children, the government’s childcare support meant that no families paid costly childcare fees from April 6 to June 13.

Tips for families being helped financially by COVID-19

For some families, COVID-19 has actually helped them save money through:

  • Not paying childcare fees (day care/pre-school/OOSH)
  • Reduced transport/petrol costs
  • Not eating/drinking out
  • Not getting regular beauty treatments
  • Not paying for children’s extracurricular activities like sports/dance/swimming
  • Record low home loan interest rates or falling rents

With that $9.6 billion now sitting in Australian’s bank accounts, some households may be wondering what they can do with their new savings.

You may want to put some of the money you have into a savings account as a financial buffer to help you through any tough times ahead. With no word on how long the COVID-19 pandemic will last, making a rainy-day fund isn’t the worst idea.

If you have outstanding debts, now may be the time to consider chipping away at them. Whether you have a credit card to pay off, or want to get ahead on your home loan, paying down your debts can make a real difference to how much interest you pay in total. If you’ve got multiple debts, experts generally recommend starting with the debt with the highest interest rate first.

Further, you may also want to consider renovating or upgrading your home. Investing your savings back into your home may add value to your property in the long run. Further, you may also be eligible for the $25,000 grant for home renovations on offer from the government.

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Learn more about bank accounts

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.

Opening a bank account for someone under 18

Do I need to open a business bank account?

Just because you’re in business doesn’t necessarily mean you need a business bank account. You could be a sole trader not registered for GST, and use your personal bank account for business.

If you do want a business account, there are plenty of benefits attached to business transaction and savings accounts, as well as business term deposits.

There are business bank accounts designed for businesses with a high volume of transactions, and those for start-ups with a small amount of trade. You could also include an EFTPOS service with your account.

Some business bank accounts charge for the number of transactions per month, while others offer a pay-as-you-go fee structure, where you only pay fees for transactions you make.

It’s up to you whether your priority is mainly transactions, or earning the maximum amount of interest on your principal. There’s a business banking solution for you if you need one.

Can I find my bank account number online?

Yes, you can find your bank account number by logging into your online banking and clicking on the relevant account.

How do you set up a bank account online?

Once you’ve compared bank accounts and found the right one, the process of opening a bank account online is quite simple and can be done in around 10 minutes.

To set up a bank account online, you’ll need to prove your identity and provide an approved form of ID as well as your tax file number (TFN).

If you’re a new customer of the bank, you’ll need to verify your identity and potentially upload documents before you can complete your online application.

Once your ID has been verified and you’ve set up your bank account online, you should receive your bank cards in the mail along with your PIN and any other account details.

How can I close a Commonwealth Bank account?

You can close your Commonwealth Bank account at any branch, provided you have appropriate identification. You can also close your account over the phone, by calling 132 221, 24 hours a day.

Can foreigners open bank account in Australia?

If you’re migrating, studying or working in Australia, you’ll be pleased to know that you can open an Australian bank account. For the most part, opening a bank account in Australia is a simple process which starts by comparing the types of bank accounts foreigners can open in Australia.

Once you’ve found a bank account that suits your needs, you can start the application process.

When you apply for the account, you’ll need to provide proof of ID which may include your passport, overseas ID or credit card. You may also need to provide a copy of your visa and proof of address in Australia.

Depending on the bank and the type of account you choose, you may be able to apply for the account online or over the phone before you arrive in Australia.

How do I close my bank account online?

You can usually easily open a bank account online, but you often can’t close it online.

Many banks and credit unions will only let you close an account if you go into a branch or call them on the phone.

However, some banks will let you request to close the account via your internet banking. Check your financial provider’s website for details.

Just remember: If you still have funds in the bank account, transfer them to another account, or withdraw the cash. Also, if you have any payments like direct debits going in or out of the bank account, these will also stop when you close your account.

What do I need to open bank accounts online?

Opening a bank account online is a simple process and only takes between five to 10 minutes to complete. To get started you will need a computer or smartphone with internet access.

Information to have available when you’re ready to apply is:

  • Identification (such as driver’s licence, birth certificate, passport, proof-of-age card)
  • Tax file number
  • Residential address, email and a contact number

In some cases, you might be asked to provide employment details. If you’re not able to verify your identity online, most financial institutions let you provide this in the branch at a later date.

There are some types of bank account that you can apply for only in a branch. However, most bank accounts can be applied for conveniently online.

How do I overdraw my Commonwealth Bank account?

Overdrawing a bank account can happen by accident. It’s often hard to know what your balance is, particularly with direct debits, scheduled repayments and pending transactions competing for cash.

To avoid being stuck with a bank fee every time your account is overdrawn, you can apply for a personal overdraft. This will enable you to overdraw your account up to an approved amount.

A personal overdraft is connected to your CommBank Everyday Account, so you can enjoy easy access to extra funds once approved – anywhere from $100 up to $20,000.

Your overdraft funds can be accessed via your CommBank keycard or Debit MasterCard, or online through NetBank and the CommBank app.

To apply you can either call the Commonwealth Bank directly or visit your local branch.

How do you deposit change into your bank account?

One way to deposit change into your bank account is to visit a branch. Many lenders will also allow you to deposit your change through one of their ATMs.

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.

How do you find a bank account number by name?

For privacy reasons, Australian banks won’t hand out account numbers or other details about their customers. However, if you provide a bank with a BSB and account number, they should be able to confirm if those numbers belong to one of their customers.

How do you change your account name on NAB banking?

Changing the name on your NAB bank account is straightforward, as long as you have the right documents.

If you’ve just got married, divorced or legally changed your name, here’s what you need:

  • Married – a marriage certificate
  • Divorced –your ‘decree nisi’
  • Legal name change –your legal name change certificate

You can take either the original document, or a certified copy, into a NAB branch, where it needs to be sighted by a bank employee and a copy taken.

Your NAB bank account name will be updated immediately. New debit, ATM and credit cards with your updated name will also need to be issued. These usually take between five to 10 working days to be posted out to you. Your existing cards will keep working until you activate your new ones.

If you haven’t legally changed your name, but just want to change your account nicknames, you can log onto NAB and do it through the Settings/Mailbox menu.