In his latest business banking post our CFO Greg Taylor talks about the latest RBA survey that shows businesses are paying too much in bank fees and how to avoid those fees.
The Reserve Bank’s latest annual survey on banks fees had more bad news for business when it was released last month. It showed that banks’ income from fees on business rose for the fourth year in a row.
Australians paid a staggering $11.4 billion in bank fees in 2012. While fee income from households fell for the third year the amount of bank fees rose from $11.3 billion last year.
That means business footed the bill, paying seven per cent more than last year in fees. They forked out $7.3 billion in fees.
The Greater Building Society's Business Banking team did a comparison of business people coming to it for a comparison of the deal they were getting from their bank compared with what The Greater could offer between Feb 2011 and May 2012. In 92 per cent of cases the Greater could save them money. The average benefit of switching to The Greater was $1,963 per annum, made up of $584 in reduced fees and $1,414 in higher interest income.
To key lesson from this comparison is that banks generally don’t proactively suggest better products. Yet products change, new ones are introduced, and business needs change.
To me that means businesses must do one of two things.
You should switch to a financial institution that does suggest new products or ways to save you money.
The other important task for business owners is to periodically review their arrangements and see what else their current financial institution or another one can offer. Check your bank statements or ask your financial institution to tell you how much you are paying in fees. Ask your business banker for advice on how to reduce those fees.
You shouldn’t be paying account keeping fees on everyday transaction accounts. Using internet, phone or mobile banking as well as your own financial institutions’ or their networked ATMs is one way to cut fees.
When borrowing, ask your financial institution to explain their fees. They should be passing on costs, rather than making major profits from fees.
This column is based on Greg’s weekly post in the Newcastle and Lake Macquarie Post.
Have you been hit by excessive business bank fees?