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Switching banks could be a very profitable move

Switching banks could be a very profitable move

Unhappy with your bank? You’re not the only one. So why not switch to a better alternative?

Australia’s 10 biggest banks have an average customer satisfaction rating of 78.5 per cent, according to surveys by Roy Morgan Research:

  • Big four banks = 75.9%
  • Other banks = 83.8%

There are more than 100 lenders in Australia, and competition for business is fierce, so chances are there’s an institution out there offering superior pricing and service to your current provider.

That applies whether you’re talking savings accounts, term deposits, home loans, car loans or credit cards.

Savings accounts

Many Australians have savings accounts with one of the big four banks; they opened an account with the branch up the road when they were at school, and have kept it ever since.

If you’re in that camp, you might be dismayed to learn that there are numerous challenger institutions that offer higher interest rates.

Right now, the big four banks are paying ongoing interest rates of up to 2.40 per cent.

BankProductBase rateMax. rate
ANZProgress Saver0.01%2.40%
WestpacLife1.00%2.30%
NABReward Saver0.50%2.30%
Commonwealth BankGoalSaver0.01%1.65%

However, there are many lenders, both large and small, that are paying more.

Here are just a few examples:

BankProductBase rateMax. rate
Bank of QueenslandFast Track Saver Account0.50%3.00%
UBankUSaver with Ultra1.81%2.87%
ME BankOnline Savings Account1.30%2.85%
Australian UnityActive Saver1.20%2.80%
INGSavings Maximiser1.00%2.80%
Bank FirstPromotional Bonus Saver Account0.05%2.80%

If your bank isn’t doing you right, you may want to consider switching to one that works better for you. 

Term deposits

It’s a similar story with term deposits, whether you’re talking one-year term deposits, three-year term deposits or five-year term deposits.

Lender1 year3 years5 years
G&C Mutual Bank2.70%2.80%3.00%
IMB Bank2.40%2.75%3.00%
Bank First2.70%2.90%3.00%
Police Bank2.60%2.80%2.95%
ANZ2.20%2.35%2.45%
Westpac2.20%2.30%2.40%
NAB2.00%1.90%2.00%
Commonwealth Bank2.00%1.90%1.90%

If you want to earn the highest interest rates, you need to switch from the big four banks to a rival institution.

Home loans

Savings accounts and term deposits are small beer when compared with home loans, where interest rate differentials can add up to tens of thousands of dollars over the life of a mortgage.

It should be noted that interest rate isn’t everything; you should also weigh up things like fees, loan features and customer service when comparing home loans. However, if we focus just on rates, you might be shocked to discover how much you could save by refinancing from one of the big four banks to another lender.

Let’s assume you’re an owner-occupier who’s looking for a $400,000 mortgage, and that you want to put down a 20 per cent deposit and pay principal and interest. If you went to one of the big four banks, the average standard variable rate would be 4.63 per cent (see breakdown in table below).

However, if you expanded your search, you would be able to find much lower rates – especially if you were willing to consider ‘basic’ home loans (as opposed to full-feature mortgages). For example, Mortgage House recently unveiled a mortgage rate of just 3.29 per cent.

LenderAdvertised rateComparison rateMonthly repayments*Total repayments*
Mortgage House3.29%3.34%$1,750$629,863
Reduce Home Loans3.44%3.44%$1,783$641,811
Tic:Toc3.47%3.48%$1,789$644,215
Freedom Lend3.49%3.49%$1,794$645,821
NAB4.51%4.90%$2,029$730,483
ANZ4.56%4.95%$2,041$734,770
Westpac4.58%4.96%$2,046$736,488
Commonwealth Bank4.87%5.27%$2,116$761,623

*Fees not included in calculations. Calculations based on a 30-year loan term.

Car loans

Car loans are another area where it’s possible to make significant savings by refinancing from a high-rate loan to a low-rate loan.

Again, interest rate isn’t the be all and end all; it’s important to also consider other factors when comparing car loans. But, all things being equal, a car loan with a lower interest rate is better than a car loan with a higher interest rate.

If you wanted a $30,000 car loan with a five-year term, here’s a comparison of some of the cheapest car loans in Australia with car loans from the big four banks.

LenderAdvertised rateComparison rateMonthly repayments*Total repayments*
PrimeEdge4.99%6.04%$566$33,960
Bank First5.29%5.50%$570$34,208
Community First Credit Union5.34%6.10%$571$34,249
Move Bank5.39%5.66%$572$34,291
Commonwealth Bank8.49%9.54%$615$36,921
Westpac8.49%9.67%$615$36,921
ANZ12.45%13.32%$674$40,451
NAB12.69%13.56%$678$40,670

*Fees not included in calculations.

Credit cards

When it comes to credit cards, all the big banks offer low-rate cards, with interest rates ranging from 9.90 per cent to 13.99 per cent.

That is less than the average interest rate of all the credit cards on the RateCity database, which was 16.80 per cent at the end of April.

However, there are other providers that charge interest rates under 9.00 per cent (see table below). It’s also possible to find credit cards that impose higher interest rates than the big four, but don’t charge an annual fee.

ProviderProductInterest rate (ongoing)Interest-free days (maximum)Annual fee
G&C Mutual BankLow Rate Visa Credit Card7.49%50$50
Community First Credit UnionLow Rate Credit Card8.99%55$40
Easy Street Financial ServicesEasy Low Rate Visa Credit Card8.99%55$40
Northern Inland Credit UnionLow Rate Visa Credit Card8.99%0$0
Commonwealth BankEssentials9.90%55$60
WestpacLite9.90%45$108
ANZLow Rate12.49%55$58
NABLow Rate Card13.99%55$59

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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