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How to compare banks

Australian banks, also known as Authorised Deposit-taking Institutions (ADIs), may allow you to not only protect your wealth, but potentially grow it. Smart use of different banking products, from everyday bank accounts to saving accounts and term deposits, may allow you to gradually increase your bank balance over time, and help you better reach your financial goals.

ADIs not only include traditional banks, but also mutual banks, credit unions and some online and app-based neobanks. Different banks offer different features and benefits for their customers. When you compare banks, it’s essential to compare the value offered by these features and benefits to the costs that may be involved, and to consider which options may best suit your household’s needs.

While banks and similar financial institutions may offer home loans, personal loans, car loans, credit cards and similar financial services, the core of their business is often based around bank accounts and related products.

Bank accounts

Bank accounts, also known as transaction accounts, are intended for everyday use. You may have your own everyday transaction account, or share one with a spouse or partner as a joint account. 

When you’re paid by your employers or clients, it’s likely that the money will be deposited into your transaction account. And when you use a debit card to withdraw cash from an ATM or make a contactless (tap and go) debit card purchase, the money will likely come out of your bank account by default.

Most bank accounts are offer convenient access to your money, whether through online banking, ATMs, or by withdrawing cash from a bank branch. Some bank accounts may also offer extra features such as access to smart payment systems like Apple Pay, Samsung Pay or Google Pay, or mobile apps to help users with their budgeting and mobile banking.

However, the more features and benefits a bank account offers, the more it may potentially cost in monthly or annual fees – a more basic ‘no-frills’ bank account may charge low fees or even no fees at all.

Does everyone need a bank account?

It may be theoretically possible to get by without a bank account in Australia by making only cash transactions and keeping your wealth as physical assets, such as cash banknotes, gold bars, gems or jewellery. However, finance in Australia and around the world has become increasingly digital, making a bank account more of a necessity to conduct many types of transactions, such as preparing a direct debit for an ongoing expense, paying bills with BPay, or to transfer money via internet banking.

If you’re concerned about the safety of your money in the bank, such as what would happen to it if the bank were to suddenly collapse or go out of business, keep in mind that any money you deposit with an ADI is automatically guaranteed by the Financial Services Guarantee, up to $200,000 per person per ADI. This means that even if the worst should happen, you should be able to get your money back.

How do you compare bank accounts?

Much like other financial products, the best bank account for you may not be the best choice for the next person. Consider what you want from a bank account, what benefits are being offered, and what costs may be involved.

You can use RateCity’s comparison table to view a wide range of bank account options side by side.

Savings accounts

A saving account is a bank account that’s been optimised for saving money. Savings accounts let you earn interest on the money you deposit - the more money you can deposit in a saving account, and the longer you can leave it there, the more you may be able to grow your wealth.

When you deposit money in a savings account, you’re effectively lending this money to the bank for it to put towards providing financial services for its other customers. This means you’re entitled to receive interest payments from the bank, similarly to what you’d pay if you were to take out a loan.

Is a bank account the same thing as a savings account?

While your everyday bank account may sometimes be called a savings account (such as when you’re choosing between cheque, savings or credit accounts on an EFTPOS machine), it may not be the best available option for saving money. It’s certainly possible to save money in your everyday bank account by diligently making regular deposits and minimising withdrawals, however most regular bank accounts don’t pay interest on your savings.

How do you compare savings accounts?

Saving accounts are often compared by their interest rates – the higher the rate, the more interest you may earn from deposits in the account. However, there are other features and benefits to also consider before making an application.

Some savings accounts may charge annual or monthly admin fees – if you expect you’ll be earning less interest from your savings than you’ll be paying in fees, you may want to consider different options. Additionally, if there are terms and conditions on earning the most interest from you savings account, such as minimising withdrawals and depositing a minimum amount per month, you may not enjoy the most value if this does not suit your circumstances.  

Term deposits

A term deposit functions almost like a cross between a savings account and an investment. In this arrangement, you agree to deposit a sum of money with a bank or similar ADI for a specific length of time (or ‘term’), over which you will earn interest on your savings.

Term deposit accounts earn interest at fixed rates, so you can often calculate in advance just how much interest you can earn on a term deposit, they’re often much less risky than investing your savings in other assets, such as shares. Plus, the money you deposit will be guaranteed by the government’s FCS.

However, it’s not always easy to find a term deposit with a high interest rate, so you may not enjoy returns as high as you might with some other asset classes. And even if your lender changes its interest rates during the term, you’ll still be paid interest at the same fixed rate.

Because you agree to deposit your money for a pre-set term length, you won’t have easy access to your money if you need it in a hurry. It’s sometimes possible to end a term deposit early by giving at least a month’s notice, but you may have to pay a penalty fee and/or miss out on some or all of the interest you’d earn.

How do you compare term deposits?

The simplest way to compare different term deposit offers is by their interest rates – the higher the rate, the more you may be able to grow your wealth. Generally, longer terms mean higher interest rates.

You may also want to look into how the interest is paid on your term deposit. Interest may be paid at the end of the term (‘at maturity’) or at regular intervals (e.g. annually, quarterly, or even monthly). The interest may be deposited into a separate bank account, or it may be added to the term deposit balance, allowing you to potentially earn interest on your interest (compound interest).

It may also be worth looking at a term deposit’s rollover options. Some term deposits offer automatic rollover, where when once the term reaches maturity, it will automatically roll your balance over into another term unless you say otherwise – even if the interest rate is no longer as competitive as it used to be. Other term deposits pay out at maturity and require you to notify the bank if you want to roll your balance over.

How to compare bank interest rates

Much like with home loans and personal loans, banks base bank account interest rates on a range of factors, including the national cash rate set be the Reserve Bank of Australia (RBA). However, while borrowers often like to see interest rates decrease, as lower interest charges may help them repay their loans faster, savers often prefer to see interest rates increase, as earning more interest may help them grow their wealth faster.

When comparing bank accounts, many Australians search for the highest interest rates. However, the bank account with the highest interest rate may not always be the best bank account for you. For example, a bank account that pays a higher rate of interest but also charges higher fees or offer fewer features may not provide as much value as some other options.

What are bonus interest rates?

Some bank accounts (most typically savings accounts) offer bonus interest rates to customers who fulfil certain terms and conditions. For example, if you deposit a minimum amount of money each month, and make no withdrawals from your savings account, you may be able to earn interest on your savings at a much higher rate, and grow your wealth faster.  

If you believe that you can fulfil the requirements for a bank account’s bonus interest rates in your normal financial circumstances, you may be in a good position to enjoy the benefits of these higher rates. However, if you think you may struggle to fulfil the conditions to receive the bonus rates, you may want to consider some alternative bank account choices that could offer you more value.

How do you compare bank performance?

One of the simplest ways to estimate the value offered by a bank account is to compare the value of the perks it offers to the costs involved. The benefits may include earning interest on your savings, or access to useful financial features and benefits. The costs could involve fees or other charges, which may you may need to pay annually or when you access certain features and benefits.

What are common bank fees?

Some everyday bank accounts and savings accounts may charge an annual fee to help cover the admin costs of providing the account. The more features and benefits a bank account may include, the higher the fees may be.

There may also be fees involved when you access certain features and benefits of a bank account.

Some of the fees you may encounter include:

  • Establishment fee (paid once, when you first open an account)
  • Monthly account-keeping fee
  • EFTPOS transaction fee
  • Currency conversion fee
  • Branch cash withdrawal fee
  • Phone transaction with operator assistance fee
  • ATM withdrawal fees (such as when using an ATM outside of the bank's serviced network)

Term deposits rarely charge monthly account fees or other ongoing fees, and some are completely fee-free. However, if you exit a term deposit early you may have to pay a penalty fee as well as missing out on some of the interest earnings.  

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Can I get a refund on car insurance?

Have you decided to cancel your car insurance policy? Maybe you’ve sold your car, or you found a better rate elsewhere.  Perhaps you’re just not driving it anymore. So what happens to the unused amount of your car insurance? Can you get a refund on unused car insurance in such a scenario?

It often depends on who cancelled the policy: you or your insurance provider. If you initiated the process of cancellation, then you may be able to get most, if not all, of your unused amount. There might be some cancellation fees involved.

However, if the policy has been cancelled by your provider, because you defaulted on a payment, then you will not receive any refunds. Keep in mind, sale of your vehicle, or traffic violations such as receiving too many speeding tickets, or being charged with reckless driving, are not reasons to withhold refunds.

If you pay your insurance monthly, your future payments will simply stop. However, many insurance policies are paid upfront for the year, as some companies offer discounts. If this is the case, get in touch with your insurer about getting a refund for the unused amount.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

This article was reviewed by Head of Content Leigh Stark before it was published as part of RateCity's Fact Check process.

FAQs

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 a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

Are bank accounts frozen when someone dies?

Yes, Australian bank accounts are frozen when someone dies. If you want to close the account of somebody who has died, you might have to provide proof of death and a copy of the will. You might also have to prove your relationship to the deceased person.

If you have a joint bank account with somebody who has died, you will generally be entitled to all the money in the account. Again, you might have to provide proof of death if you want to change the bank account from a joint account to a one-person account.

How do I open a bank account for a child?

There are few better ways for a child to learn about money management than through savings. And there’s a plethora of bank accounts designed specifically for young people and children.

A bank account for a child can be opened online, over the phone or in a branch in a few easy steps. The minimum age a child can open a bank account for themselves usually ranges between 12 and 14.

If the child is too young to open the account, you can do it for them as their legal parent or guardian. 

To do this, you would need to be over 18, have an Australian residential address and currently reside in Australia (or have proof of residency).

You would also need to provide:

  • Identification for yourself and the child
  • Your tax file number (TFN) or TFN exemption

Depending on the bank account, you might be able to choose what level of access the child has to their bank account (online and via the phone).

How can I wire money to a bank account?

You can wire money to an Australian bank account either through your own bank or by using a money transfer company such as Western Union or MoneyGram. Either way, you’ll need the other person’s name, BSB number and account number. If you use a money transfer company, you might also need to provide the recipient’s address for large payments.

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.

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.

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.

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.

What do I need to open a company bank account?

To open a company bank account, you will probably have to provide 100 points of ID, an ABN and an ACN. You will probably have to provide the details of all signatories as well.

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.

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.

How can you cash a cheque without a bank account?

You can cash a cheque without a bank account if you visit the bank that issued the cheque. For example, if somebody sends you a cheque from Bank X (as written on the cheque) and you visit Bank X, it’s likely that Bank X will let you cash the cheque – provided the person who wrote the cheque has enough money in their account. Bank X would probably charge you a fee for the service.

How to transfer money to another bank account

Transferring money to another bank is often called a bank transfer, and it can be done a few different ways.

Customers generally need three pieces of information to transfer money to another bank account. Customers need the account name, BSB and account number of the account they wish to transfer money to.

One way of transferring money to another bank account is in a branch with the help of a staff member; they will often give you a receipt as well as confirmation of the transfer.

Transfers can be also made via internet banking and phone banking.

Some banks also allow customers to make transfers via partnered ATMs, especially if the account is with the same bank.

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.

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)

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.

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 debt collectors take money out of your bank account?

Many people find themselves struggling to cope with debt at one time or another. In these cases, a debt collector could contact you to demand payment for a debt, to explain the consequences of you failing to pay a debt, or to organise alternative payment arrangements.

If you’re contacted by a debt collector, you may be wondering what their rights are and whether they can take money out of your bank account.

Creditors cannot access money in your bank account unless a court order (also known as a ‘garnishee order’) is made to allow creditors to recover debt by taking money from your bank account or salary.

If this happens, the creditor can take money out of your bank account unless you pay the debt in full or make an alternative payment arrangement such as paying in instalments through the court.

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.