Switching banks could be a very profitable move

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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.

Bank Product Base rate Max. rate
ANZ Progress Saver 0.01% 2.40%
Westpac Life 1.00% 2.30%
NAB Reward Saver 0.50% 2.30%
Commonwealth Bank GoalSaver 0.01% 1.65%

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

Here are just a few examples:

Bank Product Base rate Max. rate
Bank of Queensland Fast Track Saver Account 0.50% 3.00%
UBank USaver with Ultra 1.81% 2.87%
ME Bank Online Savings Account 1.30% 2.85%
Australian Unity Active Saver 1.20% 2.80%
ING Savings Maximiser 1.00% 2.80%
Bank First Promotional Bonus Saver Account 0.05% 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.

Lender 1 year 3 years 5 years
G&C Mutual Bank 2.70% 2.80% 3.00%
IMB Bank 2.40% 2.75% 3.00%
Bank First 2.70% 2.90% 3.00%
Police Bank 2.60% 2.80% 2.95%
ANZ 2.20% 2.35% 2.45%
Westpac 2.20% 2.30% 2.40%
NAB 2.00% 1.90% 2.00%
Commonwealth Bank 2.00% 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.

Lender Advertised rate Comparison rate Monthly repayments* Total repayments*
Mortgage House 3.29% 3.34% $1,750 $629,863
Reduce Home Loans 3.44% 3.44% $1,783 $641,811
Tic:Toc 3.47% 3.48% $1,789 $644,215
Freedom Lend 3.49% 3.49% $1,794 $645,821
NAB 4.51% 4.90% $2,029 $730,483
ANZ 4.56% 4.95% $2,041 $734,770
Westpac 4.58% 4.96% $2,046 $736,488
Commonwealth Bank 4.87% 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.

Lender Advertised rate Comparison rate Monthly repayments* Total repayments*
PrimeEdge 4.99% 6.04% $566 $33,960
Bank First 5.29% 5.50% $570 $34,208
Community First Credit Union 5.34% 6.10% $571 $34,249
Move Bank 5.39% 5.66% $572 $34,291
Commonwealth Bank 8.49% 9.54% $615 $36,921
Westpac 8.49% 9.67% $615 $36,921
ANZ 12.45% 13.32% $674 $40,451
NAB 12.69% 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.

Provider Product Interest rate (ongoing) Interest-free days (maximum) Annual fee
G&C Mutual Bank Low Rate Visa Credit Card 7.49% 50 $50
Community First Credit Union Low Rate Credit Card 8.99% 55 $40
Easy Street Financial Services Easy Low Rate Visa Credit Card 8.99% 55 $40
Northern Inland Credit Union Low Rate Visa Credit Card 8.99% 0 $0
Commonwealth Bank Essentials 9.90% 55 $60
Westpac Lite 9.90% 45 $108
ANZ Low Rate 12.49% 55 $58
NAB Low Rate Card 13.99% 55 $59
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