Loyalty versus bank switching – should you stay or should you go?

According to a study by the Australian Securities and Investment Commission (ASIC), more than 30% of adult Australians who used school banking programs during their childhood have remained with the same banking institutions. For some, investigating banking options may seem like hard work but in fact, it’s simpler than you think.

Taking some time to look around may save you money in the long run, or at the very least, arm you with reasons to remain loyal to your current banking set-up.

Higher rates: Many bank account interest rates are the highest they’ve been for years and this has had a big influence on people shopping around with banking institutions – those who want to take advantage of the best and most convenient offerings for their individual needs.

High fees: Another reason why people may want to switch banks is that they are dissatisfied with bank fees and are seeking a lower fee or no fee at all.

Better services: Better online banking capabilities and streamlined banking apps are push factors for changing banks. People want the flexibility of managing their banks with ease, along with better customer service.

Better protection: The Financial Claims Scheme (FCS) applies to a wide range of deposit accounts held with authorised banks, building societies and credit unions. This is a deposit guarantee of up to $250,000 in the unlikely event of potential loss or failure on the institution’s behalf.

Cash bonuses and cashback are two different types of monetary offers that banks provide customers. In some cases, an account will offer both.

A cash bonus offer is when a banking institution offers monetary incentives to a new customer as a little 'thank you' for opening the account but this offer may have some conditions. These may include a certain amount of money deposited or several transactions made.

Cashback offers are a great perk as you are receiving a small amount of money back on your usual spending. These offers may also involve conditions but are usually an ongoing bonus for the account holder. An example could be a small percentage of cash back on debit card transactions – when you make a purchase amounting to $200, you may get back something like 1% in return, which is $2.

Most banking institutions want to keep and reward their loyal customers, and this is often done by way of a loyalty or ‘rewards’ program. An example may be a loyalty card where the customer is rewarded with gifts or bonus purchases for repeat or regular purchases.

Another common way banks reward their loyal customers is via a points system where the customer can collect points over time for purchases and redeem them for gift cards.

If you are considering a switch, the first step to make is to choose a new bank. Make bank comparisons online by checking out fees and charges including ATM withdrawal fees, monthly fees, and foreign transaction fees. Also, make sure you can access your money in the way you want, without special requests and/or additional fees.

Side note: If you decide to change banking institutions, ensure you keep a little money in your old account for a few months in case there are some transactions set up that you have missed during your transfer. Eventually, you will want to close the account altogether to avoid account-keeping fees, if any.

ASIC has bank account switching rules in which a financial institution (bank, building society or credit union) is now required to provide a list of regular direct debits and credits to a new financial institution at a customer’s request.

According to ASIC’s guidelines, to switch an everyday transaction account from one financial institution to another, a customer can ask their new provider to contact their old provider for a list of their regular direct debits or credits from the past 13 months.

This may include regular debits and credits such as:

• Utility payments
• Mortgage or rental payments
• Gym memberships
• Salary payments
• Pension payments
• Regular income such as investment dividends.

Once the customer has decided which of their debits and credits they want to switch to their new transaction account, their new financial institution can be authorised to make it happen.

Whether you are a loyal customer or a confident and regular bank account switcher, the key to getting the most out of your spending and savings is regular reviewing of your bank accounts to make the most of account incentives that suit you.

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. Any links provided are for general information only and should not be taken as constituting professional advice. National Seniors is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how any information provided relates to your unique circumstances.