Home loan rates: am I being ripped off?

As a loyal customer of your credit provider, you’d like to think that you’re on one of the best home loan rates. However, that’s most likely untrue if you’ve been a loyal customer. That means you’re on what’s called the “back book” of the bank’s home loans. As with many companies, banks get complacent and use you for the revenue you bring in. So the question stands, what’s the best way to get a good home loan rate? What do you do if you’re being ripped off?

This article will be handiest for those customers who always pay on time, never overdraw their accounts, are honest and have a high income. The reason that this is important is because your internal credit rating with your bank will be higher. Did you know that overdrawing your account, even by $1, can impact your credit rating? It’s incredibly important to keep on top of these things. Anyway, onto the steps every high-performing customer should take.

  1. Evaluate your existing lending. There’s no use calling your bank and complaining about rates if you’re comparing apples to oranges. What I mean by that is, you shouldn’t just look at the cheapest loans on the market and compare your loan to that. Figure out what you have. Do you have a line of credit? Do you have a professional package? Do you have a no-frills home loan? Find out which loan you have and see what interest rates that bank is offering on the product that you already have.
    Note: If you can’t be bothered doing this, see a mortgage broker and they will help you, often for free.
  2. Research what kind of rates are out there, based on your needs. If you need the flexibility of a line of credit, don’t expect home loan rates. It costs banks more money to have those funds available for you to draw upon at any time, than it does for you to have a home loan that’s fully drawn. So for that reason, you should again compare apples to apples. If you no longer require that additional flexibility, you can downgrade; but you can often do this within your own bank, without actually refinancing anywhere.
  3. Speak to your bank. Once you’ve figured out what you actually have and what’s out there in terms of rates and packages, you should call your bank. If you have a specific contact such a relationship manager, they may care slightly more about your dissatisfaction than if you have to call a call centre. Whilst there’s no need to be rude, you should as for a Discharge Authority if you feel like you’re getting nowhere. A Discharge Authority is the form which you’d need to fill in if you were refinancing. Don’t be surprised if the call centre operator is not in a position to help you and try to remember that it’s not their fault that your rate is higher, even though you are an existing customer.
  4. Speak to a mortgage broker about refinancing. If you’ve still not had your pricing reviewed to your satisfaction, you need to speak to either another bank, or a mortgage broker. Mortgage brokers can help you distinguish what’s actually being sold to you. For example, if someone is trying to refinance you into something with a much lower rate but much higher fees, this is something that a broker should be able to warn you about. Also, don’t be surprised if you move away from the major banks to find that there may not be quite as much payment or technical functionality in smaller banks than large ones; check first. Just make sure you go somewhere that you are comfortable with in terms of fees and technology if you do go somewhere else.
  5. If you’re right about being ripped off, bite the bullet and leave. Banks, after all, are there to make money. You could have a brilliant relationship with a banker, and that’s fantastic and definitely something to think about. It’s rare to find talented and caring people anywhere, so I wouldn’t leave purely based on rate if I was in that sort of scenario. However, if you find that the bank is trying to save your business based on everything except for price, you should be prepared to bite the bullet and just leave. New customers will almost always get better deals, so you may be better off becoming a new customer at another bank.

So there it is. Obviously this is not applicable in every situation (for example, if you have hard some sort of financial hardship or are unable to keep up with your loan repayments), but it will apply to many people who have been silently paying off their home loans. Home loan interest rates are at such a trough right now that it’d be difficult not to take advantage of them, and so irritating to see everyone else paying 1-2% less than yourself.

 

Loyalty and reward programs are fantastic, here are 5 things to beware of

We certainly love our reward points here at Help Me Bank. They can be a great points boost to whichever loyalty program you are a part of.

5 things to beware of when signing up for a loan or card reward program

  1. annual fee. Beware because some banks waive the first annual fee and then charge an inflated one in the coming years to make up for it. If you close your card, some banks will also charge you a pro-rated fee. What’s more, they’re totally allowed to do this.
  2. the points can take a long time to hit your account. I mean a long time, up to 6 months depending on your bank, type of card and the bank’s policy. In other words, don’t sign up for a card if you need the points to book a trip in a couple of weeks, you’ll be waiting a while.
  3. the requirements to get the points can be unreasonable, difficult or unsuitable to you. For example, there have been cards that require for you to spend $2500 in a month for you to be eligible for the points. That’s just too much for many people’s budgets, so don’t bother signing up for that card.
  4. make sure you focus on the type of card or loan you need, not the reward points, because the points will disappear but the card or loan will remain. Try to look at the points as a bonus. You don’t want to be stuck with a card without an interest-free period if you need one. You don’t want to be stuck with a high-interest rate card with an interest-free period if you want a low rate or low fee card.
  5. don’t go crazy applying for cards, or there will be too many credit enquiries on your credit file. Every time you apply for a credit card or loan with any financial institution, it is counted as a credit enquiry. This is seen as risky by banks and other financial institutions unless there’s a good explanation for it. Banks don’t typically recognise rewards programs as a good enough reason, which is unfortunate but is just the case.

I hope that helped – just beware of all of the terms and conditions and read everything you can before signing up.

Why you should never pay fees for your transactional personal banking.

I could talk about business banking, but I think that many people are more concerned about their personal banking. Further, I am incredibly concerned about the fact that people actually pay money to keep their transactional accounts.

Let’s just think about it for a second. Banks are businesses. Businesses are there to make money. It only makes sense that banks will try and make as much money as they can, so it’s important for us consumers to be aware of what we should and shouldn’t be paying for.

If you have a bank account, are you technically paying for that service? Yes, even if you just deposit money into a basic transaction account, you are technically paying. Why do I say that? I say that because if the bank is not paying you a high interest rate (and I use the word “high” loosely here, but I mean the same rate as that of a savings account, currently around 2-3.5%), then the bank is at an advantage. They get to hold onto your funds and use them behind the scenes whilst your money sits there and does nothing.

The truth is, most everyday banking and transactional accounts in Australia are designed so that no interest is generated. Wealthy people often like this as this means that their tax returns aren’t complicated by yet another item to consider as income.

However for the lay person, there is no reason none at all – to be paying any fees related to your personal transactional banking. How do I know this? I know this because there are free bank accounts out there. I know that there are absolutely despicable banks charging fees for all sorts of things, stealing your hard-earned money for things like when a direct debit bounces. Why does the direct debit often bounce? Because you don’t have money in your account or some sort of an error happens. At best, they punish you for something that’s not your fault. At worst, they just kick you when you’re down.

If you get fees charged for keeping an account (which if you use Internet Banking, basically costs the bank nothing anyway) – you are being ripped off. If you pay fees because of dishonours (the bouncing I just mentioned earlier), you are being ripped off. If you pay fees for anything that’s not an additional service (for example, if you decided to get some sort of financial analysis, and that wouldn’t be from a branch) – then you are being ripped off.

I am not going to tell you which banks have free bank accounts because there are comparison websites which already do that. I will tell you to carefully read all disclosure documents if you do open a new account, and to watch out for cheeky fees that the banks can charge. All fees should be listed in the Product Disclosure Documents and Fees and Charges guides that are given to you when opening an account.

I currently have completely free transactional banking and I refuse to pay any fees for it because that money does not earn interest. You shouldn’t pay fees for that either. Find a bank that will give you free transactional banking and also aim for one that has free access to a large ATM network so that you don’t pay cheeky $2 or more withdrawal/account-balance checking fees.

Note to home loan customers: If you have a home loan with your bank and you have transactional banking with them, but they charge you fees – just threaten to refinance, especially if they argue about the fees or are rude to you. Unless you’re a delinquent customer, they won’t want to lose you over a few small transactional banking fees. Don’t take bad service. If they start treating you like a bad customer, complain. I will soon post about the best way to complain to a bank.

3 reasons worth considering having a credit card.

It’s true, credit cards can be nasty for a number of reasons, such as:

  • you’ve chosen the wrong card type;
  • you’re in a troubling financial position and obtaining a credit card will over-extend you; 
  • you’ve got too many bills, and remembering an extra one is too difficult;
  • you treat the limit as ‘free money’, instead of seeing it for what it is;
  • if managed poorly, they can ruin your credit rating;
  • if you don’t follow your bank’s fraud and dispute resolution procedures, you could lose money if you are defrauded;
  • they could tempt you if you don’t exert self control; and so on.
Really, I can go on for hours about why many people choose not to get a credit card. 
I’m not here to do that though. I’m here to explain how I take advantage of the banks. There are ultimately three main reasons, and I will gladly address the above points to explain why in my particular situation, I am not too phased by the above. 
Why I have a credit card:
  1. Frequent Flyer points program; 
  2. Easy online payments for goods and services; and
  3. Bill / pay cycle management.
Frequent Flyer points program

In terms of managing money, everyone has different priorities. As someone who rarely holidays by choice, I have to say that obtaining a deal on frequent flyer membership was fantastic for me. This did not come with the credit card, but it certainly helped paved the way towards me getting a card. Many cards come with a frequent flyer points bonus. My first credit card came with 40,000 points – a boost that helped me go on the very trip that started this blog. 
Needless to say, I signed up for a credit card with an interest-free period long enough that meant that I never, ever pay interest – ever. Instead, I accumulate frequent flyer points for free. It works because I am always on time, so the banks can’t fault me for that. What it means for me is that I can accumulate many points over time and obtain free flights, and I really cannot say no to that.
Easy online payments for goods and services

Many merchants accept online payment via credit card these days. You can actually stick your credit card onto your Paypal account, securely paying for everything and accumulating points for the purchases that you would otherwise have made. 
Also, there is no need to be concerned about your Debit card being compromised. I can speak from banking experience that it is often much more difficult to stop scammy merchants on a Debit card, savings or transaction account than it is a credit card. 
So in other words, there is a little more peace of mind (at least in my mind) for those of us who are concerned about their details being compromised.
Bill / pay Cycle Management
If you find that your employer is a little bit less accurate with your salary, don’t worry – you can still pay your bills on time with a credit card. You just need to make sure that you aren’t always relying on this and are always paying your card on time. Otherwise, you’ll need to pay interest.
You can also talk to your bank to change your statement cycle to be more suitable, but this can take a few cycles to arrange.
In summary, those are my reasons for using a credit card. It costs me nothing and I reap the benefits of free flights. When applying for a credit card, be sure to be honest in your application and only get it if you don’t currently over-spend, as if you do, this will only put you into a negative financial situation.
I would never get a credit card if I thought I needed it. I don’t ever use it for emergency purposes, as that’s what an emergency cash fund is for. Also try to remember that if you are in a position where you might need one, that there’s a reason why the bank might give you one – and it is not necessarily for your best interest. 

Why I have a relationship with multiple banks.

Multiple banks? Why would you do that to yourself, why? Isn’t one bad enough?

Well, the short answer is actually yes, and that’s exactly why I have a relationship with them.

The truth is, as with any organisation, their main focus is making money. I took an interest in banks at a young age, when one of the majors here in Australia had a wonderful campaign to reel in children by getting them to save. This genius strategy meant that the bank gave us a branded money envelope and deposit slip book, all with the cuteness of kiddish characters – it was actually perfect. My whole school was hooked and I remember pestering my parents for a dollar to deposit because that was the cool thing to do.

Needless to say, I only have one account with this bank because of them trying to charge me fees when I was a student when student banking was supposed to be free, and I had presented my student card to them seven or eight times – but they just kept “forgetting” and charging me fees. That was really the first time that I thought about going to another bank.

You might think it’s petty to go to another bank because of a $4 or so monthly account-keeping fee, but I was fresh out of school, studying in university and trying to get by. I was relying on this $4 a month to help keep me afloat and the bank that I had been loyal to had betrayed me. I had to fight to get the monthly fees reversed and they wouldn’t even reverse all of them.

That’s when I found out – a competing bank was actually offering the same type of everyday, basic style transaction account for free. I didn’t even need to show them my student card, it was free for people regardless of their circumstances. Had I not had the negative experience with my bank, I might have graduated from uni and then started paying the fees unknowingly. I just had no idea about what was out there.

So this is a big reason as to why one should interact with multiple banks – even if it is painful to some degree. It might pay off in the long term because banks try to differentiate themselves through many of their products and services. Another thing I’ve also noticed is that as a new customer, I tend to often get far better treatment as an existing one as they need to actually work to get my business.

It’s like once the novelty wears off, I am no longer of interest to the bank. Furthermore, I know that if I tell my existing bank that I want to get a new loan but bank Z has offered me a better rate than what’s on offer, my existing bank will either try to match it, or risk losing me as a customer. So it’s a pretty good way to make them compete in my experience.

I’ve found that unless I’ve threatened to leave, many problems remain unsolved. I’ve probably found 1% of employees to be genuinely knowledgeable and helpful. It’s so hit and miss – no wonder people keep switching between banks. I’ve given up on “switching” as such, I just have things spread relatively evenly between the majors.

Of course, everyone has different experiences, but these are my ramblings and I hope that they’ve been somewhat insightful.

Despicable overseas funds issue.

It was my first holiday in nearly 8 years, and one of a handful of overseas trips that I’ve ever been on as an adult. I was in such disbelief that I would even make it that only when I got on the plane did it feel real. I prepared for my holiday by doing my due diligence:

  • notifying all of my banks that I was going overseas, (“please guys, don’t block my cards. Call or email me if there are any issues”); 
  • ensuring I have multiple cards available;
  • getting a travel card, even though it was more of a fuss; and
  • obtaining some local currency for emergency purposes.
So what was so awful that I am creating a blog? Well, one of my cards unexpectedly didn’t work for a transaction during a particularly important moment. Had I not obtained another card, I’d have missed my train from Paris to London and throw a couple of hundred dollars down the drain. I was trying to buy a ticket to go from the city I was in to go to London and I had previously not had any issues purchasing similar tickets from the same merchant (a UK government body), multiple times a day throughout the week.
When I called the bank to try and investigate, I was sheepishly advised of a few things. 
Firstly, they tried to blame it on the ticket sales operator saying that he made a mistake. That didn’t fly because I was able to use a competing bank’s card immediately and I watched him press the same buttons to sell me the ticket. 
The bank operator tried to give me a number of excuses, including “I don’t see the transaction attempt on file” even though he read out a particular error number to me about the transaction. I was put on hold multiple times and transferred three times. I had to be security-checked every single time, despite informing each person that I was calling from overseas. 
That’s not what I call service and I decided that nobody should ever have to suffer like that. It turns out that in actual fact, it was a bank fault – they had temporarily blocked my card for the day because someone accidentally ignored my overseas travel note that day. It was fixed the next day, but I still would have missed my train to Paris had I not had another card.
It’s important to be prepared when going overseas and consulting with the bank you’re with. I’m with multiple banks to avoid situations like what happened to me. If you do what I did, you might save some heart-ache. Just remember that many of the operators you speak to don’t want to tell you the truth because they might not know it themselves, or they worry that they’ll upset you and it’ll be a negative phone call for them.
Remember to be polite but firm because nobody wants to help a screaming psycho, especially when they’re taking hundreds of similar calls a day. You’ll stand out if you’re kind, cooperative but ask more questions than what they’re used to.