Saturday, August 01, 2009

Beware of Banks Banning Fees

Just a quick thing. One of Australia's banks, National Australia Bank (NAB*), recently announced it was going to scrap its overdraft fees. Isn't that wonderful! Isn't that just so darned kind of them to go and take away all those annoying charges?!

The National Australia Bank has announced it will axe its overdraft fees, which cost customers almost $1 billion a year. From October, the NAB will scrap the $30 fee imposed every time a customer overdraws their personal transaction or savings account.

What a bunch of kind hearted Robin Hoods. To go and do without that billion dollars in pure profit like that. What do the folks at consumer group Choice have to say on this?

Christopher Zinn from consumer group Choice says the NAB can now claim a competitive advantage if other banks do not follow suit. "The NAB is really showing leadership to the rest of the banking community, showing 'we can afford to live without these fees, they have given us a bad name, it's an unsustainable model'," he said. "The figure's out of the bag as to this massive take of $971 million.We believe that it would be really unlikely that the [other] banks would be able to carry on with these fees."

It's all rainbows and paradise for Mr. Zinn, isn't it? Can anyone else hear a bank; any bank, saying it can do without those profits because it makes them look bad? Anyone? Zinn is just so positive about the banks, like he knows the banks are really on our side. I just have to wonder, with the interest rates being so low just now, and the economic crisis slowing and things starting to turn around and climb back into some kind of stability (where was the repeal of fees when everyone was losing their jobs?), just where will the banks try and get their profits from? From the increase in new customers coming to their bank with the lure of no overdraft fees or, maybe with increasing interest rates once they've increased their debt pool? Maybe increasing fees for its business customers? Those Australian businesses everyone is proud of and is encouraged to buy from? They could cover the shortfall, right?

What do you think? I personally think it's the bank trying to butter up the public before it sinks its stinger in. This is a bank we're talking about after all. Profits are everything. This is big business, one has to be highly suspicious when a big business suddenly announces it's going to cut a billion dollars of profit from its books and we must speculate where that profit is going to come from. The quick answer is from interest rates.

We all know the banks are nostalgic for the 80's and it's not for the fashion. It's for the glory days of milking the public dry with it's out of control interest rates. Just look at the history. Although this is the Australian chart, trust me that the American and UK ones are pretty similar.

So let me consider, a Happy Couple taking out a mortgage just now, and fixing the loan to the current low rate for five years. What is the projected interest rate in five years? Will the couple be able to make those payments in five years if the interest rates shoot up? Will they have to sell up and downsize? There's a bit of a property boom on just now, house prices (at least here in Australia) are up, it's turning into a sellers market again. What about the person who buys now, mortgages to a fixed rate and then finds themselves in negative equity five years down the line?

It's just not the right time to buy , there are too many unknowns out there just now. Top it off with a bank being friendly and cutting its fees and I'm backing away looking for the exit. Fast!

We are renting for the first time, and it looks like we may be renting for quite some time - and that's ok. Sure it's annoying not having the right to paint the walls the way we want, or to build a deck out back or anything else. We save instead. Squirrel away, ride out the uncertainty and let the mortgage owners sweat this one out. For the first time in 14 years we are completely 100% debt free. We owe nothing to no one. It's rather wonderful. We're going to let that feeling last a good while longer and see where it takes us.

*(National Australia Bank does bring up thoughts of bank robberies with NAB doesn't it??)

**They're all chiming in now Zinn must be a psychic. Or, the banks have it all figured out now how to fleece everyone.


Brook said...

I worked in banking for years at a desk. The fees ARE ridiculous and expensive for customers(I know you know this too) and a wonderful example of how money is something made up out of-I would say thin air, but these days it's interweb ethers I think-nothing. What a crock. Australia has, up until now, seemed to have avoided the financial shit that has hit the rest of the world's fan, but this looks like the first step on a slippery slope to join the rest of the World in our current crapfest. Have fun! And keep renting-let someone else fix the toilet!

jomamma said...

lol, Brook, my hubby would hug you! I don't have time right now to read the whole article, but I smell a scam. Banks are in hot pursuit of insurance companies in the field of being low-down and dirty.

Maja said...

The Australian banks are usually completely blatant about screwing over their customers. I'm with the commonwealth and they increased their interest rates (by a very small amount) a few months ago, apparently to cover increasing lending costs. Nevermind the massive profits they make every year.