The common banking mistake costing Aussies thousands

Almost one in three Australians, are committing this error when banking and it could be seriously affecting your finances.

A third of Australians are making the same banking mistake generation after generation.

Almost a third of Aussies are making a common banking mistake, potentially costing them thousands of dollars a year.

New data from Finder revealed 30 per cent of Australians are banking with the same financial institution as their parents without shopping around, with the habit possibly causing them to pay unnecessary amounts of interest, fees and charges.

Sally Tindall, insights director at Canstar.com.au, said the convenience could be doing your hip pocket more harm than good.

“Doing what your parents did might feel safe, but it could be costing you hundreds, if not thousands of dollars,” she said.

“Not only has banking evolved in leaps and bounds since your parents took out their first account, your financial needs and goals are likely to be vastly different to those of your parents.”

She said loyalty, convenience and nostalgia were some of the biggest reasons people failed to diverge from their parents’ bank, and loyalty in banking rarely paid off.

Finder money expert Alison Banney said sticking to the same financial institution as your folks could mean paying unnecessary monthly account keeping fees, international transaction fees and ATM withdrawal fees.

“These can all add up to hundreds of dollars a year, which you could completely cut out by switching to a bank that doesn’t charge these fees,” she said.

Another potential problem of staying with the same bank as your parents, is receiving poor interest rates on your savings.

Ms Banney said Australians had an average of $33,000 in cash savings, and if they stuck with a 3 per cent interest savings account instead of switching to a 5 per cent interest account, they could be missing out on almost $800 a year in bonus interest.

Over time with compound interest that could mean a loss of tens of thousands of dollars.

“Switching banks can be something we put in the ‘too hard basket’ or say we’ll do another time, but then never get around to doing it; but the thing is, these days, it’s actually quite simple to switch banks and can save you a lot of money,” Ms Banney said.

Remaining with the same bank as your parents for a home loan could potentially cost you even more, Ms Tindall warned, with some Aussies able to save more than $12,000 over the next two years by changing.

“If you haven’t refinanced your home loan in the last 12 months, you’re probably paying too much,” she said, revealing someone with a $600,000 loan paying 6.61 per cent interest, could possibly save as much as $6000 a year by switching to a more competitive rate of 5.5 per cent – even after switching fees.

“Rates have shifted dramatically, so check what rate you’re on then pick up the phone to your lender and ask for a rate reduction.

“Let them know what other lenders are offering.

“If your bank won’t play ball, that’s your cue to leave.”

Originally published as The common banking mistake costing Aussies thousands