A silver lining in the midst of rate cuts: financial awareness

A silver lining in the midst of rate cuts: financial awareness

Following the recent Reserve Bank of Australia (RBA) cuts to the cash rate – taking it to a record low of 1.00 per cent – the financial industry has been under intense media scrutiny.

Whilst some worry this has damaged overall consumer confidence, a more optimistic view brings to light a silver lining:

Financial awareness

The complexities of the industry can cause many a furrowed brow, with confusion often lying in the translation of acronyms known only to the financially literate.

When you take a moment to unravel the intricacies of finance, however, you will find yourself feeling more empowered than ever before.

With the RBA cutting the cash rate to the lowest in Australian history, now is a better time than ever to start looking deeper into your finances.

RBA cash rate changes over time

Data Accurate as of 25th July 2019

How do you achieve financial awareness?

#1 Be honest about your spending

Are you a disciplined spender that can manage their money easily, saving a little every week for a rainy day?

Or, are you more spontaneous with your spending, jumping at every opportunity to buy something new? Being transparent about how you spend money is crucial, as it impacts the financial products you apply for.

Let’s say for instance that Belinda & Isabelle are travelling to Fiji and are both looking to apply for a credit card to use whilst overseas that charges no foreign transaction fees.

Belinda has always been a diligent saver and has always had savings over $5,000 since she was 20-years old. Isabelle has always spent frivolously and has never had more than $500 in her account at any one time. They are both on a salary of $50,000/year and do not have any current debts.

Whilst they may both be approved for a credit card, Isabella could be more likely to incur additional fees as she is frivolous with her spending. This could cause some post travel depression when she sees the debt she has accumulated on her holiday.

The key with managing your finances is to be honest with yourself. If you cannot control your spending, think carefully before you sign on the dotted line.

#2 Bookmark financial tools that help you do the math

Financial decisions and comparisons can often involve complicated maths equations. Luckily, in this digital age, there are multiple free tools and resources that you can use online to do the math for you.

In the market for a new car? The RateCity car loan calculator can help you compare car loans without the complicated calculations. When you have a few car loans that you want to compare, just input the loan amount, interest rate, loan term and repayment frequency.

The calculator will then show you your estimated weekly repayments, total interest paid, total amount to pay, as well as showing you various loans from lenders in an easy to compare table below.

car loan calculator

Source: RateCity Calculator

Similarly, if you’re looking to buy a house, the Australian Securities & Investments Commission (ASIC)’s Mortgage Calculator is an easy to use tool with graphs that help you visualise your repayments. Rather than staring blankly at the screen trying to make sense of percentages and fees, this calculator simplifies the entire process.

When you have a few home loans you would like to compare, simply input the loan amount, interest rate, repayment frequency, length of the loan and account keeping fees into the calculator. ASIC will then show you a graph similar to that below, so you can visualise the repayments and see the amount of interest you will be paying over the length of your loan.

ASIC mortgage calculator

Source: ASIC Mortgage Calculator

Thankfully, there are a number of financial calculators online that you can use for free to compare financial products and make an informed decision on which is best for you.

#3 Take time to review key documents

Man worried about his financial situation reading the PDS

The Australian financial market can be confusing, especially when it comes to determining what lenders do, and how they differ. With a plethora of information to read on various financial products, comparing lenders may seem out of reach for the everyday Australian.

Different fees, conditions and interest rates can be charged depending on the financial product in question, as well as the lender’s evaluation of financial risk. The advertised rate you see on the lender’s website, for example, may not be the rate you are offered.

Affordability tests that analyse a borrower’s income, credit history and assets can lead to the development of what is known as a “personalised rate.” This means lenders can change the rates to match the financial risk they believe they are taking by loaning you the money.

In a similar fashion to the mindless acceptance of terms and conditions for various products online, many consumers do not carefully read the fine print when borrowing money.

As a consumer, make sure you always look at the Product Disclosure Statement (PDS) and the Key Facts Sheet to see any hidden fees, before signing on the dotted line.

Things to watch out for:

• Different lenders offer a variety of financial products, each with their own associated fees and interest rates, and the most competitive option is defined entirely by your financial situation.
• Finance is not a one size fits all model. With every lender having different terms, conditions and interest rates, you must do your research before committing.
• Fees and charges that apply to financial products may not be displayed on the main page where the product is advertised. Make sure that you download the PDS and Key Facts Sheet and research all associated fees and charges before you sign anything.

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Learn more about bank accounts

Can I link a bank account to Paypal?

Paypal is a safe and convenient way to pay online without the need to share your financial details. You can send and receive money or accept credit and debit cards as a seller using Paypal.

It’s easy to link your bank account to a Paypal account and start making transactions within minutes.

To start, you first need a Paypal account (it’s free to join). When setting up your Paypal account, you will be prompted to link a credit card or bank account (or both if you wish).

PayPal works without a balance; you can use Paypal to shop or send money when your balance is zero.

When your Paypal balance is zero, Paypal will ask you to choose your preferred payment method at the checkout.

This could be either your linked bank account or credit card. Your bank details can be updated if you change banks or credit cards.

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 I transfer money from Paypal to my bank account?

Transferring cash from Paypal into your bank account is simple…if you have a Paypal account that is.

Once you’re logged into your Paypal account, the account balance will appear on your home page. Below your balance are two options:

  • Add money
  • Withdraw money

Choose option two if you want to transfer money from your Paypal account to your personal bank account.

The next screen will prompt you to either enter new bank account details or choose a bank account that’s connected to Paypal. You can always add more bank accounts to your Paypal profile.

Another way to transfer out of Paypal is by jumping to the wallet tab on the top menu, and clicking ‘transfer money’. Both options will give you the same result.

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 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 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.

Can you deposit money into somebody else's bank account?

One of the easiest banking tasks in the world is depositing money. You can even deposit money into someone else’s bank account if you wish.

The basic information you need to deposit money into a third-party bank account is:

  • Payee’s name
  • Bank, building society or credit union (though this isn’t necessary)
  • BSB (or bank code, which is the branch identifier)
  • Account number

Including the name of the financial institution isn’t necessary – particularly with online banking – because the BSB will identify this for you.

A handy tip is to record yourself (or add a personal message) in the transaction description or reference. This will show up on the recipients account, letting them know who’s paid them the money.

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.

How long does it take to open a bank account?

The length of time it takes to open a bank account varies, depending on whether you want to open it online or in person.

Online

Most banks and credit unions have simple online applications that usually take no more than 10 minutes to fill out. It can be especially fast if you have your identification documents like your driver’s licence and passport handy. Sometimes you will instantly be approved and the bank account opened. However, depending on the financial institution, it may take a day or so to be processed and your account number issued. Your account information and ATM or debit card will then be mailed to you, which usually takes between five to 10 days.

In person

If you decide to go into a branch or office to open a bank account, it may take about half an hour. Make sure you bring your identification documents with you. Also book an appointment if you can, otherwise you might be forced to wait in line. Sometimes your ATM or debit card will be issued on the spot, otherwise you’ll need to wait for one to arrive by mail, which usually takes between five to 10 days.

What do you need to open bank accounts?

Opening a bank account is one of the simplest online tasks you could perform. The hard part is deciding which type of bank account you want to open.

All banking institutions have a website where you hit ‘apply’ on the account of your choice and step through an application in less than 10 minutes.

Here’s a list of information that is generally required for applications.

  • Identification (driver’s licence, passport, proof of age card, proof of citizenship and/or birth certificate)
  • Tax file number (so you don’t get charged the highest tax rate)
  • Address, contact email and phone number

If you decide to open a new account at the branch, make sure you ask beforehand what information you need to take with you, or take all of the above to be safe.

Can I close a bank account with pending transactions?

You can close a bank account with pending transactions. But after the account is closed, any incoming transactions will be declined by your (old) bank.

The best way to ensure this doesn’t occur is to either wait to close your account until all pending transactions are complete, or contact the creditor and supply them with alternate bank details.

If you’re unsure whether you have any scheduled transactions, you can speak to a banking representative over the phone or via online support.

In most cases, your bank withholds the amount owing for pending transactions (such as online purchases).

Because the pending amount is deducted from your bank balance, you can close your bank account and the purchase will be honoured.

How do I open a bank account if I'm under 18?

The good news for savvy young folks like you wanting to take charge of your finances is that there are many bank accounts available for under-18s.

For bank accounts that require you to be 18 or older, you’ll have to rope in a parent or guardian to open the account for you.

Otherwise, you can apply by yourself online or at the branch of the bank, credit union or building society that has the account you would like to open. 

If applying online, you might be asked for a form of identification. For under-18s, this could be a Medicare card you’re listed on, your birth certificate and/or your current home address.

In most cases, you can verify your identity online (at the time of applying) or at the branch afterwards.

How do you delete your bank account from PayPal?

Deleting your bank account from PayPal is a simple three-step process:

  • Go to your Wallet
  • Choose the account you’d like to delete
  • Click ‘Remove bank account’

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.