If you’re still with the bank Mum and Dad set up for you as a kid, then you’re in the same boat as many Aussies.
Research has found 40 per cent of people were still signed up with their childhood bank, with one in five saying switching hadn’t occurred to them or they couldn’t be bothered.
Dr Rob Nicholls, senior lecturer at the University of NSW Business School, says banks have long known that customers don’t tend to switch institutions. And it’s why they have long been involved in school banking.
Early in his career, Dr Nicholls was told people were more likely to get divorced than change banks. He says nothing has changed today.
“It’s a real issue and it’s something that drives the behaviour of the banks,” Dr Nicholls says.Digging yourself out of debtOur youthful money habits can play havoc in later life, but all hope is not lost.Read more
Dr Nicholls says people don’t think they have time for the hassle of switching. But this means they’re missing out on better deals — like lower mortgage interest rates and fewer fees.
Xavier O’Halloran, from consumer group Choice, says making the change is not as difficult as some of us think.
“The number one reason that comes out in the research is people think it’s too much of a hassle,” he says.
“But in recent years it has been made easier, with banks required to step you through the process and help connect you with a lot of your direct debits.”Banks have lots of information about you — and they don’t keep it all to themselvesDid you know some Australian banks sell our data for profit? Find out what they probably know about you and what they can and cannot do with it.Read more
Dr Nicholls says it’s about to get even easier, with the Government’s impending consumer data right.
It will give customers unprecedented access to their banking, energy and telecommunications data.
“It’s the right for you as a consumer to download your data about your services from banks … to get a comparison from other banks so they can do better for you,” Dr Nicholls says.
“The fact you have the right to do that will help to change the attitude of banks.”
So how do you go about making change? This simple checklist can help you navigate the process of switching banks.
Step one: Look for and open a new account
Choosing a new bank is your first step.
Is my money safe?
The Australian Government protects deposits up to $250,000 made at authorised banks, building societies and credit unions under the Financial Claims Scheme.
Always check if you’re dealing with an authorised deposit-taking institution through the Australian Prudential Regulation Authority (APRA) website.
You can quickly look through products by using the many bank account comparison websites available.
But go in with your eyes wide open because many of these sites make their money from advertising and customer referrals.
Compare the rates of fees and charges, and make sure your money will be accessible in the ways you want — whether that be through online, over the phone or in person.
“Look out for monthly fees, ATM withdrawal fees or foreign transaction fees,” Mr O’Halloran says.
Dr Nicholls advises an important step before opening the new account: share the offer you find with your existing bank — it might offer you a better deal.
“Find out what the new bank will offer you, and then go back to your current bank and say, ‘They’re offering me half a per cent less than you are’ [for example], what can you do?”
If it’s still time to move on, set up the new account either online or at a branch using 100 points of identification. This may include your passport, driver licence and birth certificate. It’s worth being prepared to make the transition smooth.
Read the fine print. Bank terms and conditions vary, and you should spend time reading through these before you make a commitment.
Step two: Transfer your direct debits and credits
Now you’ve made a choice, it’s time to get serious.
Ask your new bank to follow up with your old institution. It should provide a single list of all your transactions from the past 13 months.
Direct debits such as:
- Regular membership fees
- Streaming, public transport and ridesharing services
- Subscriptions like cloud software
- Childcare fees
- Insurance payments
- Charity payments
- Utilities and rates
- Mortgage or rental payments
- Union debits
Direct credits such as:
- Welfare payments
- Pension payments
Your new bank will help update your account details with the related businesses and services. However, you will have to manually set up ‘pay anyone’ payments and BPAY transactions.
Step three: Close your old account
To cut to the chase, you need to break up with your old bank.
But you might want to hold onto that old account for a little while before you ditch it for good.
“We advise you leave a bit of money in there for a while in case there’s any old transactions you’ve forgotten about that might come out over the next few months,” Mr O’Halloran says.
Importantly, just before you wave goodbye, don’t forget to move your remaining savings over from the old to the new.
You can do this either electronically or by cheque (note: the latter may incur a cost).
You’ll have to visit your bank branch in person or call them to close the account.
A debit balance or fees will have to be paid prior to closing.
Step four: Bask in the satisfaction
You survived the switch — just like 3 million other Aussies in the past three years, says Tony Pearson, chief economist of the Australian Banking Association.
“Home loan customers in particular are switching banks regularly, with more than 30 per cent of all new home loans coming from customers changing their mortgage provider,” he says.
“Customers who are on the hunt for a better deal should shop around, with financial providers across the industry all vying for their business.”
This article contains general information only. It should not be relied on as advice in relation to your particular circumstances and issues, for which you should obtain specific, independent professional advice.