Australians are collectively pouring billions of dollars down the drain when it comes to bank fees, credit card use and home loans.
According to recent research from RateCity, they waste $5.2 billion every year on food alone — that’s $620 per household. That’s not to mention the hundreds of millions wasted on international travel fees and over one billion spent on account-keeping fees.
Anyone with a credit card or transaction account may need to rethink exactly what they’re spending their money on.
“Many of us are unnecessarily paying up to $120 a year just to hold a transaction account. Yet, there are dozens of transaction accounts that charge no ongoing fees — so there’s really no reason to be paying for your everyday banking,” said Peter Arnold, RateCity product director.
Money-hungry bank accounts
While many transaction accounts come with fees, that doesn’t necessarily make them better, Arnold explained.
“Paying a fee doesn’t necessarily equate to better service or increased features on your transaction account, so if you are forking out money for an everyday account then shop around, switch to a free account and pocket the difference.”
In fact, an everyday Australian who ditches the $120 per year in transaction account fees could reduce their overall home loan interest bill by close to $3400, paying off their loan three months early.
Expensive cash advances
Australians with credit cards often use the cash advance function to cover costs between paydays.
But they’re throwing away billions in the process.
“It’s surprising to see that Australians are still wasting money using cash advances despite the huge costs involved. In the 12 months to May this year, we withdrew a whopping $10 billion cash from our credit cards,” noted Arnold.
In turn, Aussies are paying hefty interest from the date of withdrawal, and in many cases fees to access this money. Arnold suggested investigating personal loans with lower interest rates as a more wallet-friendly alternative.
Tardiness costs money
Homeowners could pay tens of thousands of dollars in additional interest and fees if they skip just one mortgage payment annually over a loan’s lifetime.
That’s not to mention adding an extra two years onto the duration of their mortgage, according to RateCity research.
“If you know you will be short of money next payment you should call your lender immediately. They can suggest several financial hardship options such as switching to a cheaper loan, a rate discount or extending your loan term of interest only repayments,” Arnold suggested.
“If you can’t avoid missing a repayment, you should try to double your repayment the following month.”
It’s also prudent to have a buffer in place in case the official cash rate increases, in turn pushing up home loan interest rates. Income protection insurance could also be a smart idea.
There are many ways to save a bit here and there, each day. Being conscious about how much you are wasting in fees in charges is the first step.