If you’ve been loyal for life to your first bank, you are probably being ripped off.
If you are hopelessly devoted to your bank, you probably won’t have your heart broken – as Olivia Newton-John sang – but you are at risk of being robbed blind.
Studies have shown that loyalty for life to one of the major four banks is burning an $80,000 hole in your pocket.
Comparison site Mozo, a regular advocate of shopping around to find a better rate from a smaller lender, estimated that customers of traditional banks who did not refinance loans wasted a whopping $17 million a year.
The founder of The Money Mentor Way, Nicole Pedersen-McKinnon, worked out three years ago that based on interest rates on credit cards, home and personal loans, a lifetime of sticking with your original bank was costing a customer an average of $82,174 – equivalent to the price tag of a luxury car.
Back then, Ms Pedersen-McKinnon claimed that the Big Four lured their unsuspecting customers early, while they were still at school, with schemes such as banking programs, online games and mobile apps.
And they are still at it. Earlier this month, consumer organisation CHOICE lambasted the beleaguered Commonwealth Bank of Australia (CommBank) for “flogging their products” in schools.
The bank was accused of offering incentives to primary schools that helped sign up students to its Dollarmites program.
Shortly after the airing of its latest dirty linen, CommBank decided to withdraw the ‘kickbacks’ from next year.
“We have heard CHOICE’s concerns about these payments and will engage with the schools, parent and citizens’ associations and consumer groups to introduce a change to the way payments are structured from 1 January 2018 that no longer links the payment to the value of students’ deposits,” the bank said in a statement.
CHOICE linked the payments to schools with subconsciously encouraging students to become complacent about reviewing banking options as adults, which led many to stay and pay higher interest rates than they needed to later in life.
CHOICE’s chief executive, Alan Kirkland, inferred that the Dollarmites program was disguised as a marketing tool to gain “unfettered access” to “flog their products” in schools.
“Rewarding children for saving with cheap toys easily transitions to rewarding young adults with ‘special’ offers of high-interest personal loans and credit cards,” Mr Kirkland said.
“It is time to take banks out of financial literacy education, and to stop them from paying schools commissions to flog their products.”
Comparison sites encourage all bank customers to review their accounts regularly in case they can get a better deal elsewhere. Some of these sites are canstar.com.au, mozo.com.au, infochoice.com.au and finder.com.au.
Are you still a customer of the original bank you chose? Have you switched banks? If so, why did you decide to swap?