Banks should be compelled to automatically switch your money into a savings account with the bank’s highest interest rate, says one of Australia’s leading consumer groups.
Too many Aussie savers are missing out on potential earnings because banks are making it deliberately difficult to access their best savings rates, research from consumer group CHOICE has found.
CHOICE’s survey of 7500 people found as many as 45 per cent of customers reported missing out on getting the most competitive interest rate on their savings because ‘onerous’ conditions on high-interest accounts such as making no withdrawals or depositing a certain amount each month.
The survey was conducted as part of CHOICE’s submission to the Australian Competition and Consumer Commission (ACCC) investigation into retail bank deposits.
Paul Veyret, head of policy at CHOICE, says another reason many were missing out was the widespread practice of offering better rates to new customers while leaving existing customers on lower rates, a practice known as a ‘loyalty tax’.
He says the practice is deeply unpopular in the community.
“It’s shocking that banks target their most loyal customers, especially older Australians, with a loyalty tax,” he says.
“Banks need to do better by the community and, as a starting point, should be legally required to switch people to the best rate they offer.”
Mr Veyret says vulnerable groups including retirees, those with disabilities and low-income earners were especially affected by banks not passing on fair rates.
More than 96 per cent of survey respondents said they thought the rates they were getting were “unfair”. In addition, 45 per cent said they had had an unfair experience with these products or hadn’t been able to meet the conditions required to qualify for them.
The regulator is also assessing the criteria banks use when making rate decisions, including whether a person’s profession or other demographic information affects the rates customers receive.
Gina Cass-Gottlieb, chair of the ACCC, says the issue of interest rates on savings accounts affects virtually all Australians.
“The vast majority of Australian consumers have at least one savings, transaction, term deposit or other retail deposit account, and collectively Australians hold over $1.45 trillion in retail deposit accounts,” Ms Cass-Gottlieb said.
“For many Australians, the interest earned on these accounts is an important source of income, and consumers are understandably keen to ensure they are receiving a good return on their savings.”
The ACCC is due to submit a report containing its final recommendations to the Treasurer by 1 December 2023.
Are you happy with the interest rate on your savings account? How does it compare to what your bank is charging mortgage holders? Let us know in the comments section below.
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We keep only minimum money with the major banks as their interest rates are way below the smaller banks. Our term deposits are mostly with “on line” banks that have much higher interest rates for savings accounts and term deposits.
We had a quite substantial sum in a Big 4 term account earning little more than 1% for a fixed term. We were about to move this sum to another bank for over four times that interest rate when the holding bank informed us they had rolled it over for another year at the same (low) rate when they were offering 4% to new customers. We said but we
deposited it for a defined period, not forever! We gave notice and moved the whole amount and more online to another bank. Only depriving the big banks of cheap money to lend out will bring them to their senses.