Disloyalty pays: the cost of staying with one bank

Two in five Aussies are still with their childhood bank

Australians are being urged to review their banking after new research shows nearly 40% are still with the same bank they signed up with as a child.

A survey of 2026 customers reveals two in five are still with the bank their parents set them up with as a kid, raising concerns about being subject to the “lazy tax”.

This equates to more than 7 million Australians who’ve never switched banks and could be forgoing a better rate on their savings or transaction account.

Almost one in four (22%) said they were satisfied with their existing bank, while one in 10 said it hadn’t occurred to them to switch, and a further 9% just couldn’t be bothered.

Bessie Hassan, money expert at finder.com.au, says of the three-in-five Australians who had switched banks, 67% found a better deal.

“One of the biggest barriers to switching is the perceived effort involved but it’s not rocket science, and switching to a new bank could definitely be worth your while.

“The research shows we’re loyal to the banks but they may not necessarily repay that loyalty.

“You can bank on the fact that there’s a better rate out there than the one on the account your parents set up for you when you were five,” she says.

The Commonwealth’s school banking program, Dollarmites, has been around for more than 80 years and is used in more than 2500 primary schools across the country.

“A Dollarmite account was a rite of passage for many Aussie kids and the beloved yellow bank book is a source of nostalgia,” says Hassan. “But it’s also lucrative for the banks who know that if they can get your business as a kid, chances are you’ll stick around as an adult.”

That is the case for Sydney man Dominic, now 32, who has always had a CBA transaction account.

“I’ve been with the Commonwealth Bank since I got a Dollarmite children’s account in primary school – for more than 20 years now,” he says.

“My parents bank with them too, so I thought it must be a good bank. The Commonwealth is very visible, sponsoring the cricket and things like that, which gives them a real presence.

“I’ve never really thought about changing – it just seems like such a hassle with direct debiting and things like that. I don’t really feel the need to change.”

Dominic says he hasn’t thought about what it would cost him to stay with CBA.

“I don’t think it would be that much – a few years ago they had a ‘no fees’ promotion for new customers, so I called them and asked for that deal, and I’ve been on that ever since.”

Hassan urges Australians to review their bank account every year, and not fall victim to the “lazy tax”.

“There’s no point staying loyal to a bank if it’s costing you money,” she says.

“Compare savings accounts online and find out if you could be getting a better interest rate or features.

“If you’re not satisfied with your rate, first negotiate a better rate with your existing provider. In most cases, your bank will be willing to grant you a better interest rate if you can demonstrate that you’ve done your homework.”

On a $20,000 balance, every 0.25% more you earn on your savings can mean an extra $50 a year in interest.

If your bank isn’t willing to give you a better rate, it may be time to take your business elsewhere.

“Before switching providers, compare the rate as well as account-keeping fees and the type of customer service available, such as whether they have 24/7 online support,” says Hassan.

“Bear in mind online savings accounts typically offer a more competitive interest rate. Just be sure to meet the deposit requirements so you earn the bonus interest rate on top of the standard rate.”

Findings from the survey include:

  • 42% of women are still with the same bank they signed up with as a child, compared with just 37% of men.
  • About 13% of men said they no longer trusted their previous bank, compared with 8% of women.
  • Almost one in 10 women admit they could not be bothered to change banks, compared with 8% of men.
  • Generation Y is most likely to stay with the same bank – a whopping 58% still bank with the bank they signed up with as a child.
  • More than one in four baby boomers (27%) are still with the same bank.

Article by Sharyn McCowen for Money Magazine

By | 2018-02-15T05:04:34+00:00 February 15th, 2018|Home & Investment Lending, Home & Living|0 Comments

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