Mighty Macquarie Bank cuts interest rates on savings

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This week, investment powerhouse Macquarie Bank told its cash management account (CMA) customers they would be paid less for their savings, without explanation.

The bank, whose last full-year net profit was $2.2 billion, said it would cease paying interest on the first $5000 in a CMA and reduce interest paid from 1.4 per cent to 1.3 per cent on amounts above that from 1 January, 2018.

Asked by YourLifeChoices to explain the changes, Macquarie refused to justify its decision, providing instead a description of what a CMA is.

“The CMA allows integration with accounting and financial planning firms so clients can provide authority for third parties to access their account and also provide a consolidated view of a client’s financial position,” the bank explained.

In laymen’s terms, a CMA can be used for short-term investing as well as every day spending.

A second attempt at eliciting an explanation for the slashed interest rate was no more successful. The bank responded: “We don’t have anything further to add beyond our statement, which provides context on the change.”

The earlier statement from a Macquarie spokesperson went like this: “Following a careful review, we’ve made some changes to our cash management account rates. As occurs elsewhere in the industry, interest won’t be applied for CMA balances under $5000. The CMA is an investment cash hub and continues to remain a compelling offering for advisers and clients, bringing together leading cash management functionality and an award winning digital experience.”

The highly profitable bank not only refused to justify lowering its rate, according to several comparison sites, its “cash hub” is less rewarding than some of its competitors.

Infochoice.com.au’s list of top 10 CMAs have a range of interest rates. The highest is 1.95 per cent from Big Sky and the lowest is 0.25 per cent from Bank of Melbourne. The average rate is 1.28 per cent, meaning that Macquarie’s new rate of 1.3 per cent will be rather average.

A few cash management accounts have monthly fees and other charges for ATM withdrawals, cheque dishonour fees, eftpos transactions and more.

Many come with a daily withdrawal limit of between $1000 and $2000. Others facilitate Bpay, direct credit and direct debit payments.

Macquarie does not offer those payment options, nor the ability to transact over the counter or at an ATM.

Opinion: Macquarie Bank’s Merchant of Venice moment

Macquarie Bank’s inexplicable decision to take the carving knife to interest rates on cash management accounts is out of kilter with the market.

Its reluctance to justify the move to drop its interest rate to 1.3 per cent shows extreme arrogance.

The ‘Millionaire’s Factory’ – as it is known for making its executives uber wealthy – makes money hand over fist.

Its latest net profit of $2.2 billion was attributable partly to its ability to avoid a higher tax rate. The figure is also triple what it made just five years ago, from which time it has steadily enriched itself just as the savings of its CMA customers have withered.

The bank can hardly blame the “higher cost of borrowing” to explain its modus operandi. For heaven’s sakes, the Reserve Bank of Australia’s (RBA) cash rate has remained steady on 1.5 per cent for 15 months, with the last move having been a discount of 25 basis points.

While most pundits believe the next move will be upwards, the consensus is that it won’t happen until well into next year. And if paying 1.5 per cent to borrow is too expensive for Macquarie, well it has the pick of dozens of other territories where interest rates are virtually nil.

The reason why your savings are being shredded in a Macquarie Bank CMA is because your banker has been paying you less than the inflation rate. This month, the RBA said it expected underlying inflation, which is below 2 per cent, to remain low “for some time”.

An account paying interest that is less than the inflation rate eats away at an investment because the spending power of that money is diluted as prices rise, even if by the modest amount reflected by inflation.

For all the flexibility the Macquarie product offers in terms of switching money between investments, the bottom-line is that its action is barely better than highway robbery.

To see if you can get a better deal on a CMA product, visit a comparison site.

In the meantime, let’s all keep our fingers crossed that the Federal Government is indeed contemplating launching a royal commission into the banking sector. If it does and the Shylocks among the Merchants of Venice are held to account, you may well see some even more rewarding investment products coming your way.

Hope springs eternal.

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Written by Olga Galacho

30 Comments

Total Comments: 30
  1. 0
    0

    E accounts give better interest. Just use the ordinary ones for paying bills but keep putting your money across into an E account as it will attract good interest which helps with the overall budget. We don’t have a lot of money not enough for term deposits but we do get a good rate in E accounts.

  2. 0
    0

    No point having savings, hide under bed and get a centerlink payrise

  3. 0
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    A cut in interest rates for deposit accounts normally precedes a large increase in remuneration for CEOs and directors. I am willing to bet that the chestnut the bank uses to justify this is ‘short term targets being met’ Never let the economic cycle rationalise and argument for more money for the already highly overpaid people paid to run big business.
    We need a banking inquiry asap to put these greedy folk back into their corporate boxes but the current government is doing everything in its power to stop this including suspending parliament for the last week to stave off the inevitable.

    • 0
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      A banking inquiry is a waste of time and money. The whole financial system is fraying again. The next liquidity crisis will stuff everyone who hasn’t a Cayman Is account and maybe the carnage will strip those account too.

      The ideologists can bleat all they like about the unfairness in social democratic redistributions and cling to fascist arguments that fit their current wallets but the shortage of liquidity always ends badly.
      Everyone suffers including the wealthy.

      Our incomes have fallen over the past few decades as prices increase and the crunch will hit. It’s only a matter of time.

    • 0
      0

      I beg to disagree. Whilst the right seeks to avoid fixing the problem the fact is that this is not about “redistributions” but rather unfair and predatory behaviour by banks. Whilst many a person has caused his/her own demise with gambling on asset values many others were not in a bad financial decision and their lives were destroyed by banks who preyed upon them.
      The Leyland Brothers may be of interest to you Rae. Like many other businessmen these guys were employing a lot of Australians and they may have missed 2 repayments but their business model was sound and working. And then we have issue like investors putting their money into the hands of (bank) investors who put them into products they specifically asked not to be put into.
      Your post is plugging the well understood unfairness of the system. That is what you get when you put your conies into every position of responsibility and own the media. This is what the current government’s mode of operation has been since day1. Tell me about “redistribution”. When you own the casino you do as you like.

    • 0
      0

      Does anybody really think that an RC would produce better interest rates for depositors plus lower interest rates for borrowers? There has to be a margin for the institution to stay solvent.

    • 0
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      We all know about the predatory nature of these beasts Mick.

      I lost a house by trusting a bank manager’s word.

      Deal with them very very carefully is my motto.

      A Royal Commission will do exactly what and cost how much?

    • 0
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      Sceptic I agree it is vital the banks remain solvent. Any major glitch now will show up the frailty of a system running purely on debt.

      We need to remember that around 25% of the ASX is comprised of the financial system and any share price falls will impact superannuation accounts.

      What exactly did the very expensive Royal Commission into Unions achieve?

      What will a RC into Banking achieve?

      Personally I had hoped the court case and investigation into bank bill manipulations would have seen heads roll and gaol terms dished out.. If that does nothing then a RC won’t either as it will have even less power to punish any guilty parties.

  4. 0
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    Sorry Olga but it’s not out of kilter with the markets at all.

    They are selling negative B rated bonds right now in Europe with negative interest rates.
    Investors are paying Corporations to take their money as there is no safe storage for it.

    This neo- liberal, free market fascist ideology hell bent on making the user pay for everything while denying workers a fair share of the productivity and profits always fails eventually when the money ends up in fewer and fewer hands.

    What does it matter if it’s negative, 1.4% or 1.3% when asset inflation is out of control?

    • 0
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      Investors are buying assets and gold. There is an end game predicted to come soon and those with too much cash in the bank will be done over. As always the smart money will not be in this market and will buy up assets for zip. History always repeats itself.
      As for negative interest rates just wait until digital currency arrives. There will be no positive interest rates again, ever, as destitute governments spend/waste capital and have no fears about losing control. A smart move charging people money for the right to park their money and make nothing out of it. A casino in the making.

  5. 0
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    Rae is spot on about Europe, my sister tells me that the banks charge half a per cent
    interest on her savings. A few people are reported as having taken their savings out of the account and put it in a safety deposit box as that option is cheaper and a good storage for your valuables as well

  6. 0
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    So what! Macquarie Bank is not a government institution and is free to make its own commercial decisions. If customers don’t like the decisions they are free to move. Last time I checked, Australia was a democracy. Why put this article in here? Could it be tied to Labor’s policy of having a Royal Commission into banking generally? Forgive my cynicism.

    • 0
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      This Labor policy is a great idea.

    • 0
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      OM….do some research!! Mac Bank has lost many $Ms in past few yrs thx to a couple of their Executive Employees, fraud charges pending if they’re brave enough to cope with the publicity + little chance that of getting those $Ms back. Who pays for its incompetence re checking their transactions + possible legal costs – the dear ‘ol public who’ve trusted ’em with their savings. Yes, we definitely need a Royal Commission into all banks, especially the big 5.

  7. 0
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    Talk about over-playing your hand Olga. “Slashed interest rates” “inexplicable decision”, ‘Take a carving knife to interest rates” ??? Seriously, you need to get out more.

    Firstly no bank has to justify its interest rate changes whether they be up or down. If you don’t like the rate, go somewhere else! Macquarie Bank are not the only game in town.

    Second a reduction of point one of one percent is hardly a ‘slashing’ of rates. Even on a balance of say $10000 that would only yield $10 a year or about $.80c a week. I seriously doubt anyone is relying on that for financial survival. And if they are, they are in the wrong account at the wrong bank.

    “The highest is 1.95 per cent from Big Sky and the lowest is 0.25 per cent from Bank of Melbourne. The average rate is 1.28 per cent, meaning that Macquarie’s new rate of 1.3 per cent will be rather average.” As indeed it was at 1.4%!

    For goodness sake there are many other forms of investments that are way more profitable than this single CMA. Instead of trying to make something out of nothing, how about giving the readers a roadmap of those instead? Oh that’s right….. the whole intention is to kick off yet another diatribe about the evil banks! And this time ‘the millionaire’s’ bank is in your sights!

  8. 0
    0

    As I have written before: ALL BANKS ARE BASTARDS! Bring on a Royal Commission with binding powers to sort them out.

  9. 0
    0

    Average is average. 1.3% or 1.28% and then taxed – Nothing comes from nothing.
    Unless you have had a term deposit locked in from before the GFC then investing in term deposits is a waste of good investment money.

  10. 0
    0

    Not much merit having money sitting in a bank, other than giving account holders the smug satisfaction of ‘security’ itself a highly questionable value and prone to readjustment at the whim of the power brokers. Who knows, this may well be a conspiracy inspired by govt to get the gullible public to transfer funds into the burgeoning super industry where it might be put to use rather than collecting dust in a bank vault. Maybe there is method in the madness of govt/banks if transferred funds become more accessible were the pollies to nationalize super.
    Let’s face it, the bulk of bank deposits are currently held by seniors/retirees that like to think they’ll be around forever, most realizing varying degrees of social support, spend as little as possible and wish fervently to leave an inheritance. Maybe it’s time for the cycle to be broken and if the govt finds the means to jam a stick in the spokes to shake out the complacent mindset then we’d best be prepared for eventualities.
    Folk that cling to ‘the good ole days’ and ‘the way things used to be’ do so at their peril. The tipping point is closer than we think and any amount of “interest” will count for little.

    Old Man – your cynicism might yet be justified AND a Bank Royal Commission imperative.

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