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

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.