You Can Bank On A Credit Union

Sydney Morning Herald

Wednesday November 18, 1998

Anne Lampe

IT DID not take long after the Federal election dust had settled for the banks to announce yet another raft of fee increases and to step up their branch closure program. As one bank public relations officer candidly confessed last week, banks know how sensitive both issues are during elections and they are sensible enough to wait until the political climate is less heated to extract more money from their customers.

He added that the big banks will lead, call the tune and the others will follow. So much for bank competition.

So with the Christmas spending splurge and the traditional holiday period just around the corner, the banks have moved in to top gear with a plethora of fee increases. Some are direct and others so subtle you would never know you have had a tap on the head unless you carefully read all those bits of paper that accompany your monthly statements - which often end up in the recycling bin.

One reader, who says she is in her early 60s and has been with the ANZ for decades, says she has always had a free cheque facility. But she has just been told her chequebook is to cost her $25 a year.

The bank also recently announced a 50 per cent jump in account-keeping fees from $4 to $6 a month. The CPI seems to be good enough to index price rises for everyone else, but banks have put themselves outside that framework and only increase fees in double-digit form.

Barely a month after the election, Westpac has notified its credit card holders that they are in for a fee rise on December 20 - from $18 to $24, a 33 per cent increase.

On top of that, Westpac will charge 0.5 per cent of the value of any foreign currency purchase or cash advance transaction charged to the card. So on top of having to wear whatever currency conversion rate is applicable to overseas holiday or travel expenditure, a further half a per cent is to be charged.

This will not be shown as a separate amount but will be incorporated into the Australian currency equivalent of the transaction shown on the statement. Most card holders won't even be aware it has been charged. They will just blame it on the lousy exchange rate.

The National Bank is raising its annual credit card fee from January 1 by $6 to $24 for Bankcard, automatically debited to accounts each year. Customers are not expected to feel it. The National has also introduced a $20 fee for the second and subsequent lost cards requiring replacement.

And only three days after the election, the National also announced new fees for cash advances using credit cards - ranging from $1 from an ATM to $4 to a non-National ATM outside Australia or a non-National branch.

It is hard not to be cynical about the timing.

There is now also a $20 late payment fee debited to the credit card if the amount is overdue for 30 days or more and the unpaid balance is more than $100.

It is not as if the big banks have their backs to the wall. They have just recorded a combined $5.6 billion record profit. The National's fee income increased by 36 per cent to $4 billion last year. The four banks to-gether earned fee income of $10

billion in the year to June 30.

But the banks' mouthpiece, the Australian Bankers' Association, is claiming that customer fees still are not high enough to recoup the cost of operating a bank. This seems rather odd, given that the banks also claim they are are barely making money out of home loans given the competition in the home loan market. It makes one wonder where the profits are coming from.

There are people all over town saying "enough". Everyone has a whinge about the steep rises in bank fees, or about some new way they are being hit with a novel new way of charging.

But banks don't understand anger. They have grown elephant hides and are so used to criticism that it washes over them. Disaffected customers need to get out of the banks for their anger to have any impact. It is the only language understood by the banks. So if customers are paying too much to boost shareholder profits, they should ditch the bank and move to an alternative.

Open an account and get a new loan or credit card - with a lower interest rate and maybe even lower fees - outside the banking system. The Endeavour Credit Union, for instance, allows eight cash withdrawals a month and 20 cheque withdrawals or EFTPOS transactions without incurring an extra charge on top of the basic $2 monthly account-keeping fee, which is waived if a minimum balance of $500 remains in the account (most banks require a minimum balance in the thousands to waive this fee). Cheques are also free, provided they fall into the 20 free EFTPOS and cheque transactions configuration each month.

The Visa card, linked to a savings account to minimise interest costs, costs $24 a year. There are no late payment fees. Duplicate statements cost $1 rather than the $7 being charged by most banks. Lost card replacement costs $5 rather than $20 as it does with the National. The banks say that the higher costs reflect outsourcing. But it was their decision to outsource.

And there is no funny counting, either. For example, Westpac counts four transactions when one cheque is used to pay three monthly credit card payments.

Credit Union ATM and EFTPOS access is now wider than is the case for many bank customers. Banks penalise customers who use other banks' ATMs by charging them more. A few years ago, when credit union customers could only use a Rediteller, ATM transactions involved some inconvenience.

But now that CU customers can use any ATM and EFTPOS machine, mostly for free up to a set number of transactions - eg, eight ATMs or over-the-counter transactions a month and 20 EFTPOS transactions free a month in Endeavour's case - that inconvenience factor has evaporated.

After the set number of free monthly transactions has been reached, each transaction attracts a fee. In Endeavour's case, for example, the fee is between 75c and $2.50 per transaction, depending on whether an ATM is used or a counter cheque is required.

Switching accounts can be a pain because most people now get paid by direct credit. And the banks know it. But it is not unsurmountable. It means ensuring the pay office has details of your new account, and it means taking numerous bits of identification to set up the new account as well as learning new PINs.

Having recently gone through the exercise, it is best to open a credit union account while keeping the bank account open for a month or so to catch any outstanding cheques and payments that don't immediately find their way to the new account. Once the pay office gets it all right and there are no outstanding cheques to be presented, the bank account can be closed.

Then any bank announcements of further fee rises are merely academic. They are just something you read about that no longer cause any personal financial pain or irritation.

CPI - Consumer Price Index. It rose 1.3 per cent in the year to September 30.

DIRECT CREDIT - When money is shifted electronically into your bank account.