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.

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