How bank deposits and home loans can burn busy people

Too busy to check the interest rate and conditions on your loans and deposits? It could be losing you thousands of dollars a year.

Much money goes missing because people fail to check. Picture: iStock

Busy lifestyles are causing Australians to suffer hefty financial penalties when it comes to their bank deposits, home loans and other financial products.

The damage is most common in deposits, where some savers currently earn interest rates above 5 per cent but others receive zero because they don’t meet certain conditions or stick with an account that is no longer competitive.

Home loan interest rates are many peoples’ biggest expense, and the difference between the best rates and average rates is more than 0.6 per cent. On a typical $600,000 mortgage, the annual extra cost is above $2600.

Busy consumers also pay more on credit cards, personal loans and insurance by showing providers misguided loyalty or being confused or uninterested.

Swapping just 30 minutes of social media scrolling or bingeing on entertainment can pay huge dividends, money experts say.

Olivia McArdle from Macquarie Bank says many accounts have “a litany of deposit conditions”. Picture: Supplied

“Plenty of people think it’s not worth the effort, until they actually take the plunge and then kick themselves for not having done it earlier,” said Ratecity.com.au spokeswoman Laine Gordon.

“Five minutes spent checking that your rates are competitive can potentially lead to hundreds, if not thousands of extra dollars in your pocket,” she said.

RateCity says 20 banks currently offer saving rates of 5 per cent an above, but many have a base rate of 0 per cent if customers fail to meet monthly conditions. Some accounts pay no interest if your balance is below a certain level, a majority of transaction accounts offer no interest, and some savings accounts have a maximum rate of 1 per cent or worse, it says.

A handful of accounts offer good rates with no strings attached, such as ANZ, Macquarie and The Mutual, but there may be balance limits.

The Macquarie Savings Account this month lifted its ongoing variable rate to 5 per cent, following a four-month welcome rate of 5.5 per cent.

Macquarie Bank head of payments and deposits Olivia McArdle said people should check they were receiving the rate they signed up for.

“The majority of high-interest savings account rates available in market come with a litany of deposit conditions, for example, depositing a certain amount over a certain period, meeting age criteria, or growing or maintaining a specific balance,” she said.

“We saw from last year’s ACCC Retail Deposits Inquiry that on average, over 70 per cent of bonus interest accounts did not receive the bonus interest rate.

“Busy people sometimes forget to meet all the conditions required to achieve that higher rate and unfortunately, the consequences of forgetting to meet just one condition could mean dropping to a very low rate.”

Ms McArdle said there were no catches with the Macquarie Savings Account: “our customers do not need to jump through any hoops to meet any deposit conditions”.

RateCity’s Ms Gordon said many savers earned high interest rates for only a short time.

“There are millions of Australian savers who have signed up to introductory rate savings accounts in the past five or 10 years, which gave them the sugar hit for a few months or so, and have now been earning close to zero for years, because they haven’t gotten around to switching.”

Ms Gordon said the difference between the lowest and average mortgage rates was “the equivalent of more than two RBA cash rate cuts”.

She said existing mortgage customers paid higher interest than new customers, and the lowest variable rate on Ratecity.com.au was currently 5.75 per cent from Abal Bank. The lowest fixed-rate loan was 4.99 per cent for a three-year term with SWS Bank.

Comparison websites have found that thousands of dollars a year can be saved by switching to cheaper car loans, health insurance, credit cards, home insurance and car insurance.

Originally published as How bank deposits and home loans can burn busy people