Paul Clitheroe
Paul Clitheroe

Bank fees aren't hard to avoid

CONSUMERS have benefitted from a steady decline in bank fees in the past few years but figures from the Reserve Bank of Australia (RBA) show there is still a long way to go.

Each year since 1997 the RBA has surveyed bank fees. The latest results show bank fee income earned from households fell from a total of $5.2 billion in 2009 to $4.1 billion in 2012.

On one hand it's great to hear we're paying less in bank fees. But four billion dollars is still a massive slug on household wallets - and usually it's easy to avoid or at least reduce many of the more common bank fees.

To see how you could save on everyday bank fees, take a look through the latest statements for your regular transaction account.

If it shows you're paying a monthly account keeping fee it could be time to switch to a different account because there are a growing number of transaction accounts that don't charge this sort of regular fee.

Next, check your statement for 'foreign' ATM fees. These apply each time you use an ATM that doesn't belong to your bank's network.

Foreign ATM fees often work out to around $2.50 per withdrawal. Used every now and again it won't send you broke, but if you're using a foreign ATM two or three times a week, you could be paying over $300 each year just to access your own money, and that's just ridiculous.

Avoid this type of charge by sticking to a machine or network belonging to your bank, or take cash out when you pay for purchases with EFTPOS. You can also make fee-free withdrawals at an EFTPOS machine belonging to one of the big supermarket chains like Coles or Woolworths - there's no need to make a purchase.

Another simple way to save on bank fees is by ensuring there's always enough money in your everyday account to pay for direct debits like your power bill or loan repayments. If there isn't, and your balance dips into the red, you could be charged an 'exception fee'. This is one area where bank fee revenue from households has climbed over the last few years.

In 2012 for instance, consumers collectively paid exception fees totalling $261 million on deposit accounts alone. Yet it's a cost that can be sidestepped by planning ahead for regular electronic payments.

Making the most of your money isn't just about avoiding unwanted costs. It also involves making the money you have work harder. Some transaction accounts pay a miserly rate of interest - usually below 1%, though most pay no interest at all. So it makes sense to only hold enough cash in your everyday account to pay immediate bills and expenses.  Any spare funds should be parked in a high interest savings account.

Online banking makes it easy to switch money between a savings account and an everyday account. If you hold both types of accounts with the same financial institution an online transfer is normally immediate without the need to wait 24 hours before you can access the funds. It's an easy way to keep your cash working at all times.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.