Scrapping ATM fees: what it really means for your wallet

Millions of Australians will be breathing a sigh of relief as the news that Commonwealth Bank of Australia (CBA) are scrapping ATM fees. The move has quickly been imitated by the other big four banks: NAB, ANZ and Westpac. 

The fees that see you forking over anywhere from $2 upwards just for using “foreign” ATMs cost Australians around half a billion dollars each year. 

The move sees Australia playing catch up to other global leaders, such as the United Kingdom, who have all but abolished ATM fees. In the UK, 97 per cent of cash withdrawals are free. As of 2016, there were 54,000 free-to-use ATMS, and only 16,000 that charge for withdrawals. 

RateCity is a long-time advocate for the removal of these unnecessary fees, and the news is a huge win for consumers. 

We have compiled a list of ways the move will help Australians, and ways the banks could make this hurt. 

How scrapping ATM fees will help: 

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  1. Save Aussies half a billion dollars annually 

It goes without saying, but culling ATM fees will save consumers a lot of money in the long run. Reserve Bank of Australia (RBA) data has found that Australians fork over $4.4 billion in bank fees every year, across home loans, credit cards, savings and transaction accounts. 

RateCity research shows that the average mortgage holder paid almost $500 on banking fees last year alone, including $240 a year in home loan fees and $241 in credit card fees; and a lot of these are avoidable. 

If you’re also paying a weekly foreign ATM fee, you’re handing $104 a year right into the banks’ pockets. ATM fees may be just a small piece of a bigger puzzle, but it’s a great place to start in the war against unnecessary bank fees. 

  1. Save you time 

Everyone has experienced the dread of having to walk halfway across a shopping centre withdraw cash from your banks ATM. But the tyranny of distance hits even harder in rural areas, with consumers often forced to cop the ATM fees or drive kilometres to their banks’ ATM. 

This move will not only save the time people spend searching for their own bank’s ATMs, but hopefully will trickle down through all lenders, meaning the end of ATM fees across Australia. 

  1. Increase lender competition 

Not only will scrapping ATM fees help consumers by saving them time and money, it will also help to increase competition across all lenders. 

Seventy-five per cent of Australians bank with CBA, ANZ, Westpac or NAB. One advantage of being with one of the big four banks is the convenience of their ATMs in more locations. By removing ATM fees, they have allowed consumers the freedom to join with smaller lenders without fear of being bitten every time they’ve had to withdraw money.

How scrapping ATM fees could hurt: 

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ATM fees are an over half a billion-dollar revenue raiser for the big four banks. There is now a risk that they may try to claw this money back in other ways.  

There are several common fees traps that consumers continue to fall into, including:

Traps Average Maximum Number of products available without fees
Ongoing home loan fees $339 a year $849 a year 1,980
Credit card annual fees $130 a year $1,200 a year 31
Overseas card fees $29 $36 8
Balance transfer handling fees $165 (on a $10,000 transfer) $300 148

It is entirely possible that the banks will increase these fees (and many more) to make up for the lost revenue. 

However, Treasurer Scott Morrison warned against this kind of behaviour in a statement made to the Australian Financial Review yesterday. 

“Australians are sick and tired of these types of fees. We will be watching the banks carefully to ensure they don’t pass on these costs to consumers in other ways,” said Treasurer Morrison.

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Learn more about savings accounts

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While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

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  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

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It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
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  • Employment details

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.