The pandemic and the cost-of-living crisis have resulted in most of us searching for ways to tighten our belts. You would think banks might be sympathetic, but given recent increases to bank fees, you’d be wrong.
There’s nothing inherently wrong with increasing bank fees, particularly in times of high inflation, such as now. If a fee increase helps your business survive through a tough period, most of those bearing the brunt will understand.
The thing is, though, Australia’s major banks have not been doing it as tough as most of us have. Since the arrival of COVID, ‘Big 4’ banks’ profits have soared rather than tanked.
Last financial year (2021-22), the Commonwealth Bank recorded a net profit after tax of $9.673 billion. For the ANZ, the figure was $7.12 billion, the NAB $6.891 billion, and for Westpac the figure was $5.694 billion. Between the ‘Big 4’, that’s a total of more than $29 billion.Yes tThat’s billion, not million.
So surely it’s fair to ask: “Why increase your fees when your profit is healthy?”
It would seem that the answer, at least partly, is that bank fees are significantly contributing to profits. According to a new report from consumer advocate CHOICE, Australians paid $3.2 billion in bank fees in the 2021-22 financial year. That’s more than 10 per cent of banks’ overall profits.
What is concerning – perhaps even galling – is that many of those bank fees are hitting the poorest hardest.
Bank fees – stealing candy from babies?
I have a close friend Harry (not his real name) who, like me, is a freelance writer. The pandemic has seen his writing gigs dwindle, as many who used his services looked to cut costs. As a result, his financial circumstances became very tight.
This led to some serious juggling of bill payments and a fair bit of stress. As good a juggler as Harry is, he sometimes dropped a ball, and a bill went unpaid.
Like many of us, most of Harry’s bills are paid via direct debit. His bank account does not allow his balance to go into overdraft. If there’s not enough in his account to cover a direct debit, the transaction is reversed.
That’s fair enough, but one wonders about the fairness of the next step in the process. An immediate $5 bank fee. Over two years from July 2021, Harry copped this ‘unpaid payment fee’, as the Commonwealth calls it, 25 times.
More often that not, the overdrawn amount that triggered the fee was small, sometimes only a few dollars. Regardless, Harry was charged $5 every time, taking his bank balance further into the red.
Could Harry have done more to ensure that didn’t keep occurring? Of course, and ‘usual Harry’ would have been more proactive. But Harry’s mental health was affected by his circumstances. His anxiety levels rose and he struggled to cope.
Could banks do more?
At the time Harry’s troubles began, July 2021, a large billboard on Hoddle Street in Melbourne featured a Commonwealth Bank ad. Beside a photo of a happy grandmother pushing a happy baby on a swing were the words, ‘Heart lives here’. Harry might have believed that then, but he doesn’t now.
Harry doesn’t expect the bank to give him a free pass, but believes it could have done more. When a customer is going into overdraft more than once a month, shouldn’t that raise a flag with the bank? In these days of automation it would be simple.
Simpler still, and far more profitable, is for the bank to ignore this customer’s potential hardship and slug him another $5 bank fee. Given that this whole process is automatic, that’s an exorbitant fee. It’s hard to imagine the processing cost to the bank for each such transaction is more than a few cents.
Harry’s case is perhaps not very common, but the use of credit cards certainly is. The big banks are not missing out there either. Take for instance the 94-year-old whose Commonwealth Bank “low-fee” Mastercard fees rose to 24 per cent. The increase was communicated to her on page three of her statement. Commbank cards also charge a $20 bank fee for late payment, on top of interest already being paid.
Those who can least afford it are often the ones paying those fees. A recent ASIC review found that some Indigenous customers are paying up to $3000 a year in overdraw fees.
Australia is certainly going through a tough period financially. Of some comfort is that those of us impacted are not alone. All of us are feeling the pinch. Well, most of us, anyway. Thanks in part to bank fees, the big banks seem to be weathering the storm quite well.
Do you pay regular bank fees? Do you consider them to be fair and equitable? Let us know via the comments section below.
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.