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How to beat the banks on fees, credit cards and interest

David Potts

Never stand between a bank and a bag of money, or you won’t notice it shrinking. Nearly one-third of savings accounts with $1000 or less in them earn no interest at all, for starters.

Look twice

Even when the banks pay interest, you’d better look twice.

“Some accounts still have stepped interest rates. That means that you only earn the higher interest on a portion of the balance,” the research manager for Canstar, Chris Groth, says.

For example, on $5500 you might only earn a decent rate on $500. Account-keeping fees? Just as well you asked: a $5 monthly charge on a $2000 balance is like paying 3 per cent interest - on your own money.

Another heist

Term deposits can be another heist for the banks. Often a linked transaction account is required, which may come with fees and, certainly, a much lower interest rate.

Sneakier still, when the deposit matures “some banks will give you a bank cheque, which comes with a fee, to take the money down the street,” Groth says.

And remember, bank cheques can take up to a week to clear, while you’re earning zilch.

Nasty trick

Online bonus saver accounts are a good trick, too. Many require making regular deposits and no withdrawals, but the interest may not be any better than you’d get on an account with no conditions. And it goes without saying that when banks advertise you-beaut savings rates, they’re reserved for new customers, or have onerous conditions.

Don’t ever think you’re suddenly earning more.

Kid are fair game too

Even children are fair game. Banks “will often roll your kid’s account to a transaction account earning little or no interest once they turn 18,” the general manager of infochoice.com.au, Alastair Schirmer, says.

Lending gives the banks lots of tricks to draw from.

The standard home-loan term, for example, has crept from 25 years to 30 years.

“Extending for an additional five years means much more interest being paid,” a spokeswoman for Choice, Ingrid Just, says.

Honeymoon or headline rates can conceal a higher rate when the period is over than you might have got by negotiating with the bank at the start. Usually it will revert to the standard variable rate, itself up to 0.7 per cent more than banks happily offer to almost everybody else.

Horrible honeymoons

Honeymoon deals can also come with higher fees - a dead giveaway is a gap between the advertised and comparison rate. Fixing your rate usually suits the banks. You’re locked in as a customer, and by betting against the bank how rates will go, you’re the most likely loser.

Credit cards have always been a fertile ground for the banks, costing up to 12 per cent more than other loans, and are curiously resilient to rate cuts.

A minimum repayment that’s less than the monthly interest charged extends the debt for years on end.

At least the banks have to publish a box on the monthly statement showing how much you should repay to cut into the debt.

“With a balance of $3300 and a rate of 18 per cent, repaying the 2 per cent monthly minimum would take 40 years to pay off and $17,000 in interest,” the publisher of creditcardfinder.com.au, Jeremy Cabral, says.

“You’re better off just paying an extra $50 a month.”

Since July 1, 2012 the banks have had to direct repayments to whatever is costing the most on a card, for example a cash advance.

Sting in the tail

But on deals before then they can pay off the cheaper transferred bit first, at great profit to themselves.

Tougher rules have only made the banks even more cunning.

They push low or zero-charge balance transfers to tempt you with a new credit card, but they’ve switched from using low-interest (relatively speaking, that is) cards as a lure to the more expensive gold and platinum versions.

Costly forgetfulness

So at the end of the transfer honeymoon, the interest rate reverts to 17 per cent, 18 per cent or even 21 per cent instead of 13 per cent. Not to mention a heftier annual fee.

“They’re banking on people who don’t repay the balance or forget,” Cabral says.

Credit cards attached to home-loan packages have also been upgraded to the pricier versions.

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