Australia is lucky to have a well regulated financial system with a wide range of institutions to choose from including the big banks, smaller customer owned banks, credit unions, building societies and non banks. Yet despite all this choice, we tend to stick with the same institution, even when we’re not happy with it.
Research by Canstar Blue found only 5% of Australians switched banks over the last year. It’s a surprisingly low figure when you consider the sheer diversity of financial institutions available, and the wealth of new products continually being developed.
Part of the problem is that changing banks involves some effort. At a minimum there’s some paperwork to complete and you will need to provide personal ID. On the flipside, financial comparison websites like Mozo and InfoChoice make it very easy to track down the product and provider that you believe is right for you.
To be fair, the federal government is doing its bit to make switching easier. Since last July exit fees have been banned on new home loans, and lenders are now required to provide standardised fact sheets that make it easier to compare mortgages.
More reforms are on the way. From 1 July 2012 credit card issuers will be required to provide standardised fact sheets to new card customers. Like home loan fact sheets, these will allow more of an ‘apples for apples’ comparison between cards.
We’ll also have more of a say in the amount of credit we’re offered on a new card. If you’re not confident about your ability to restrict card spending, or if you’re new to credit cards, it makes sense to nominate a low limit.
Also from July, your monthly card statement will feature personalised information showing how long it will take to pay off the card debt if you stick to the minimum repayments. I reckon this is a terrific initiative as many people don’t realise how long it can take to whittle away a card debt by paying only the minimum off each month. In some cases you could be lumbered with the debt – and high interest charges, for decades. The easiest way to clear the debt sooner, and save on interest, is by repaying a bit extra each month.
From July it should also be easier to switch your everyday bank account. Rather than the account holder having to contact all the organisations that make regular electronic transactions into and out of your account, your new financial institution can do it on your behalf.
With so many reforms making it easier to move between financial institutions – and so much competition for your business, it could be worth putting your accounts under the spotlight. If you could get a better rate, cheaper fees, or simply better service elsewhere, the effort of switching can be worthwhile.
For more information on the federal government’s consumer banking initiatives take a look at www.bankingreforms.gov.au