Written by Angelica Silva
26/03/2021 | 11 minute read
Banking used to conjure up images of stiff looking, dark suits and unapproachable, cold institutions. Now, a simple search for a bank will yield pages of results showcasing not only the ‘Big Four’ banks but a new breed of brightly coloured, competitive neo banks. So, what’s a consumer to do? How do you choose which banking institution is right for you?
If you’ve been looking for a bit more information on the banking industry but aren’t too sure where to even start, we feel you. There are so many different financial products out there that it’s difficult to know what is included and what isn’t, which accounts are standard and which aren’t. Most importantly, what you need to do to get the most out of your financial institution.
Regardless of whether you’re looking to get the most out of your current bank or make a change, you can never have enough information. So, let’s get stuck into it!
Personal banking refers to the myriad of services offered by financial institutions who typically store and handle your money for you. That’s at its most basic definition.
Today, banking has become a vast industry. Banks and other financial providers tend to offer a number of different financial products for their private customers. From your day to day bank accounts and high-interest savings accounts to personal loans and credit cards – banking remains a cornerstone of the modern-day economy.
Depending on what you want to do with your money, you have a few different banking options. The two most common account types are cheque and savings. Cheque accounts are for your everyday banking needs, like purchases and bills. Savings accounts are intended to help you with your saving and generally offer a higher interest rate, giving you a return on the money you save up. The size of that return depends on your bank and the interest they can offer you on savings accounts.
Many people will have multiple account types across institutions, to maximise on benefits or to aid with budgeting. Or both!
There’s no doubt that having someone else look after your money for you can be a little nerve-wracking. Gone are the days where everything was paid for in cash and you were able to hide your money in a hole in the mattress. These days you need a bank account to get paid and a debit card to make EFTPOS purchases.
It’s not all bad though. There’s no doubt that the banking and finance industry is at the forefront of some of the leading security advancements available today. Banks know that they have a responsibility to protect your money and, as such, they are doing everything they can to ensure that your funds stay safe while in their care.
One of the more common security measures that banks take to protect your money and details include customer passwords and two-step verification processes. This means that you can only log in if you have the correct password as well as the additional security code that will be sent to your personal phone or device. For some banks, biometric security features are beginning to be used as additional security measures in a bit to further lock down personal information and funds.
Cybersecurity is incredibly important for all banking institutions as well as ASIC, the body that regulates the financial services sector. Along with the two-step verification process, many banks are adopting artificial intelligence (AI) and machine learning to offer their customers improved security features, as well as the ASIC Cyber Resilience best practices. The AI will be able to detect any anomalies or fraudulent activities quickly. This fast detection will allow banks to inform their customers much faster than previously possible.
In the unlikely case that something does happen to your accounts most banks will also guarantee that any unauthorised transactions on your account will be reimbursed, offering an extra layer of guarantee.
Overseas banking transfers and payments have become a huge part of banking with the increasingly global world that we live in. Families are spread all across the world, companies are international and sometimes, we need to send or receive money from someone who is in a different country. Many international subscriptions or services can result in international banking fees which, whilst small, can add up. Make sure you raise this with your bank if you do have a lot of international subscriptions.
Generally, if you’re planning to transfer money to a bank account overseas, you’ll need the bank account details of the recipient, the SWIFT code of the particular bank – this identifies their bank numerically – and the name of the recipient. The swift code and bank details can often be found online – easy peasy!
Rather than having to go and find the closest Western Union that might be miles away from you, check if your online banking now allows overseas transfers and international banking functionality at reasonable rates, to make your life just that little bit easier.
Most banks don’t just offer bank accounts. They also offer borrowing services for individuals who would like access to additional funds or lines of credit. This can include personal loans, credit cards and home loans.
Not too sure how borrowing money works? Let’s dive in.
Personal loans are a financial product which allow a consumer to borrow money from a financial institution or lender and repay this money back over an agreed period of time, with an agreed amount of interest and fees included.
A personal loan can be a good way of getting the money that you need at a reasonable interest rate and, depending on your lender, getting funds fast.
Generally, your repayments are set amounts that are direct debited every week, month or fortnight (depending on your pay cycle) and won’t change unless you refinance your loan. Unlike with a credit card or line of credit, the amount borrowed is set so you can work fixed repayment costs into your monthly budget and may not be tempted to redraw or spend more.
Personal loans can be either secured or unsecured depending on how much you’re looking to borrow and the lender.
Credit cards are notoriously linked to shopping, but are they all frivolous fun?
Basically, credit cards are lines of credit that you are able to use to make purchases, withdraw cash or organise balance transfers.
These lines of credit are able to be redrawn, unlike most personal loans, as long as repayments are kept up to date and you haven’t exceeded your credit card maximum balance. You must make monthly repayments on your balance owing as a minimum. Most credit cards will have different interest rates that will be charged on the balance owing on the card, so the lower your balance is, the less you will be charged.
Home loans are banking products that are similar to personal loans but on a much larger scale. As the name suggests, this banking product is intended for the purchase of a home or in some cases, the purchase of land.
These tend to be secured loans, which means that the lender will use the home that you are purchasing as security against the loan in case anything happens and you are not able to repay the loan. If you do happen to default on the loan, the bank has the right to take possession of the home and resell it to pay off the debt. Home loans are big responsibilities and quite a milestone so if you’re looking into getting a home loan – congratulations!
As home loans are generally much larger than a regular personal loan, the interest rates may be lower, usually in the range of 2-5%. Your home loan can be either variable or fixed for a period of time which means that your interest rate may change (variable) or it will remain the same for a set period of time such as 2-5 years (fixed).
Variable rates will change with the current interest rate so your repayments may be lower or higher depending on what the official rate is. Fixed interest rates will not change regardless of what the official interest rate does, until your fixed period finishes. Your banking institution will discuss the best rate with you and what your options are.
One of the best perks of modern personal banking is the fact that you have access to all your accounts through internet banking.
Even better, internet banking has evolved into banking apps, quickly accessible on your smartphone. These apps typically usually feature similar security features to internet banking, however, they make it incredibly easy for you to access your own accounts. Simply input your login details and password (or sometimes fingerprint or face ID, depending on what you have set up) and you’ll have access to all of your accounts.
Not only will you be able to see all your existing accounts, but you may also be able to open new cheque or savings accounts, transfer money between accounts, apply for personal loans or credit cards and even get an application started on a home loan if you wanted to.
You can often also update your details, get proof of address documents emailed to you and even send money overseas, all from your internet banking. Having your banking so accessible has revolutionised the finance industry. What used to take hours, days or weeks can now be done in mere minutes, simply with a few taps of the computer or your smartphone screen.
Banking is one of those things we think about often, but not nearly as much as we should. Your money is at your fingertips but have you chosen a bank that really works for you?
Whether you have a bank you love or are looking for a new one, it may be worth questioning what rates you are getting and looking at your savings and money goals to ensure you’re getting the most from your bank, banking app and money borrowing facilities.
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
The Australian Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.*This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.