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Hidden fee traps and how you can avoid them

Hidden fee traps and how you can avoid them

One of the most common ways we lose money is through paying avoidable fees.

In June 2017, the Reserve Bank of Australia (RBA) released data that showed Aussies are paying $4.41 billion a year in banking fees, with many of the highest charges relating to home loans and credit cards.

So how can we avoid getting stung by unnecessary fees?

RateCity spoke to Sydney mother of two, Natalie, about how she found herself falling into her bank's fee traps, and how she’s choosing to break the cycle.

It all adds up

RateCity research found that the fees collected from credit cards in the 12 months leading to June 2017 totalled $1.56 billion – an increase of $48 million from 2015. Home loan fees also hit $1.24 billion, an increase of $5 million from the year before.

Whether it’s through ATM fees or choosing credit cards with annual fees, we’re all guilty of paying them and we’re not always aware they exist.

Natalie certainly wasn’t when we spoke to her.

“I was quite surprised as I always thought I was rather thorough when looking at those things,” she said. 

“I guess I didn’t look at all of the fine print. I found out about a few fees didn’t even know existed!”

Natalie found that on her credit card she was currently paying an annual fee and rewards package fee.

She was also at risk of paying the following fees on her transaction account:

  • Monthly fees;
  • Dishonor fees;
  • Periodical-payment-not-made fees;
  • Account overdrawn fees;
  • Overseas ATM cash withdrawal fees; and
  • Foreign transaction fees for online shopping.

When Natalie first took out her home loan she paid a progress draw set up fee and fixed rate lock in fee (0.10 per cent of her loan amount). She also makes ongoing payments due to a package fee on her mortgage.

“I wasn’t really made aware of these fees when I joined,” said Natalie

“They talk to you about the main fees, like withdraw fees and ATM fees, but when it comes to something like a fee to access my credit card rewards program, I was definitely not aware.

“And it adds up to hundreds of dollars,” said Natalie.

How can everyday Aussies like Natalie break the fee cycle?


Natalie’s story is not unique, especially when banks are making $4.41 billion dollars a year off banking fees.

Some fees may be unavoidable, however, there are a few ways that you can beat the banks and reduce your overall payments.

  1. Credit card annual fees

There is really no reason to be paying an annual fee on your credit card as there are over 30 on the market that don’t charge you. Also, keep an eye on rewards cards as they often attract the biggest fees.

Average fee: $130

Highest fee: $1,200

  1. Ongoing home loan fees

The process of taking out a home loan can be extremely taxing and often confusing. Unfortuantely, home loans are full of hidden fees so before you sign on the dotted line make sure you ask your lender for a complete run down on all the fees you’ll be expected to pay over the life of the loan. This way you avoid nasty surprises and budget accordingly. There are almost 1980 home loan products that don’t have an annual fee, so it pays to compare.

Average annual fee: $339

Highest annual fee: $849

Home loans without annual fees:

  1. Transaction account fees

Sometimes lenders will charge a monthly account fee that is small enough that you may not notice you’re paying it. There are plenty of zero fee options available so find out if you’re paying more than you should – consider switching.

Average fee: $55 a year

Highest fee: $420 a year

  1. Superannuation fees

All super funds incur some sort of fee but the amount you pay can vary wildly from just over $300 a year up to over $1,100 a year, based on a $50,000 investment. While fees should not be the deciding factor when choosing a fund, if they are excessive they can eat into any returns you may be earning. Look at the funds medium to long term performance in addition to the fees to see if you are getting value for money.

Average fee: $631

Highest fee: $1,100

  1. ATM fees

It goes without saying that you should stop using ATMs outside of your bank’s network. If possible, make ongoing goals of avoiding them for a month, six months and then a year. Plan cash withdrawals ahead for the week, or even withdraw cash at your local Woolworths when you do a grocery trip. By saving $2 a week on ATM transactions throughout the year you could be $104 richer.

ATM savings: $104 a year.

  1. Car loan fees

Car loan application fees can be exorbitant. On average, they are just under $100 but can be as high as $410, so doing a bit of research can save you a lot of money. Further, once you have your new car at home in the garage, try to avoid any account keeping fees, which on average will set you back $7 a month.

Average car loan application fee: $197

Highest car loan application fee: $410

Car loans without application fees:

  1. Overdrawn fees

This type of fee occurs when you accidentally withdraw more money than you have in your account. This is often caused by scheduled direct debits so set a reminder at least two days beforehand to ensure you have enough money in your account.

Average fee: $11

Highest fee: $40 (every time you go over)

  1. Balance transfer handling fees

If you have outstanding debt on your credit card a 0 per cent interest rate balance transfer credit card is an enticing way to buy yourself some time. However, it’s important to remember that one way lenders make money through these cards is with a handling fee that will be a percentage of the amount transferred. There are 148 cards on the market that don’t sting you with this additional fee.

Average cost (on a $10K balance transfer): $165

Highest cost (on a $10K balance transfer): $300

  1. Overseas card fees

It’s easy to get swept up in the fun of a holiday and forget that your credit card is racking up currency conversion fees. There are currently eight cards on the market that don’t charge this, so do your research before you leave and you’ll have spare cash to splash.

Average: $29

Highest $36 (per trip, based on a $1,000 spend on your credit card and use of the ATM four times).

Small changes add up to a world of difference for your savings

We asked Natalie what she thought now knowing about these hidden fees.

“I’m definitely looking at my home loan and credit card differently,” said Natalie.

“My family moves around a lot and we’re not a loyal type of banker. We normally just look for recommendations from friends or news stories around interest rates.

“We always picked our credit card based on the best interest rates – same with mortgages.

“This has made me want to shop around and look at other lenders with less fees, instead of looking at who has the best interest rate,” said Natalie.

Hidden Fee Traps

ITEMAverage FeesHighest Fees
Credit card annual fee$130.53$1,200
Ongoing home loan fee$339.33$849
Home loan discharge fee$295$1,400
Home loan application fee$518$995
Transaction account admin fee$55$40
Transaction overdrawn fee (assuming 1x per year)$11.17$40
Superannuation fees (on $50K)$631$1,100
ATM fees (based on one withdrawal a week from an alternative ATM)$104$104
Balance transfer credit card fee ($10K transfer)$165$300
Overseas ATM fees (based on 4 ATM withdrawals per trip and one trip per year)$13$10
Overseas currency conversion fees (based on a credit card spend on $1K, and one trip per year)$29.60$36.50
Car loan application fee$197.89$410
Car loan monthly fees$84$600
TOTAL ANNUAL FEES (excluding one off application fees)$1,563$4670

(The above table was calculated using the average and maximum savings possible. This will vary from person to person based on their individual circumstances.)

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