Three things you should never do with your transaction account

Many people have used the same one for decades, prompting fresh warnings to pay closer attention in order to avoid costly mistakes.

An analysis of the country’s 10 biggest banks for household deposits has found most do not pay any interest while some still charge monthly fees for customers who do not meet certain conditions.

Sticking with the same account because of nostalgia or inertia can potentially be costly, and banking specialists say there are key mistakes that customers should try to avoid.

A report for the ACCC’s Retail Deposits Inquiry in 2023 found 95 per cent of Australians held a transaction account and almost 30 per cent had the same transaction account for 20 years or more.

Canstar data insights director Sally Tindall said many Australians were still with the first bank they signed up with as children.

“For some, it’s simply a case of setting and forgetting,” she said.

“For others, it’s about loyalty – or even a touch of nostalgia.”

Ms Tindall said holding a transaction account long term was often harmless so long as it wasn’t racking up fees and charges.

“However, if that loyalty leads you to take out a credit card, a personal loan or a mortgage with the same bank without checking what else is out there, you could quickly discover that sticking with the familiar doesn’t always pay off,” she said.

Among the 10 largest household deposit-holding banks in Australia, only two pay any interest on transaction accounts – Macquarie Bank at 2 per cent and Suncorp at 0.1 per cent.

Three of the big four banks – CBA, Westpac and ANZ – charge monthly fees but waive them if customers deposit at least $2000 per month or meet other conditions.

Macquarie Bank head of deposits and payments Olivia McArdle said many people did not realise they were potentially missing out on benefits.

“We find a lot of people who have been with their bank for a number of years have almost been conditioned into thinking that getting paid no interest on their transaction account is normal,” she said.

“Others think being charged a fee when they don’t make a certain deposit each month is standard across the market, when it’s actually become quite outdated.”

There are three common mistakes made with transaction accounts that potentially cost consumers thousands of dollars.

1. Paying unnecessary fees

A report for the ACCC’s Retail Deposits Inquiry found the big four banks are preferred for transaction accounts, yet three of them charge conditional account-keeping fees.

Ms McArdle said there was “no good reason why anyone should be paying a fee to keep their account open or put up with being threatened by their bank with one if they don’t deposit a certain amount each month”.

She said customers should also check the rules around ATM fees, with some banks limiting fee-free withdrawals or charging fees to use other banks’ ATMs.

2. Stashing too much cash

It can be costly to keep thousands of dollars sitting in a transaction account. People with mortgages can instead use that money in an offset account or redraw facility to reduce their loan interest, while others should switch their money to an account paying higher interest – even if with the same bank.

Ms Tindall said people should not let big balances “sit there gathering dust”.

“A transaction account is for moving money in and out, not for stockpiling savings,” she said.

“If you’re hoarding cash in there, you’re missing out on interest you could be earning in a dedicated savings account.”

3. Ignoring fine print and direct debits

Today’s world of digital transactions means ongoing direct debits can be missed for months or years. Ms Tindall suggested examining your transaction history and reassessing whether some of those direct debits were still needed.

“That unused gym membership or a TV subscription service you rarely use could spark a Marie Kondo effort that saves you more money than you’d originally planned,” she said.

Ms Tindall said customers should check the fine print, because some accounts “clip you with hidden charges from overseas transaction fees to ATM fees”.

Ms McArdle said access to travel benefits within transaction accounts was an increasing area of competition among the banks.

“There are some great offerings in this space now, meaning Australians can avoid fees from their bank when they withdraw money or make a purchase while on holidays, or even from an international retailer while using their debit card online,” she said.

This article first appeared in The Australian as The costs of bank loyalty and a set-and-forget transaction account