Whether you’re after a higher interest rate on your savings, still stuck with your childhood bank, or being charged a loyalty tax (i.e. where long-term customers are charged more than new customers), there are many reasons why you might want to change banks.
However, many are often hesitant to change banks as they believe there’s a lot of hassle and time involved or they’re not even sure where to begin.
A study by the Queensland University of Technology (QUT) and Heritage Bank found that Aussies could save up to $11.6 billion a year by switching their service provider including banking. It also found Aussies who compared different offers and made the switch saved more than $2.5 billion per year, as a nation.
If you’re considering making the switch, check out our helpful guide below including what to look for in a bank and how to change banks.
What are the different types of banks?
Before we dive into how to switch banks, it’s important to understand the types of banks there are in Australia. These include:
- Traditional banks (e.g. ANZ, CommBank, Westpac, and NAB)
- Credit unions, mutual banks, and mutual building societies (e.g. Credit Union Australia, Macarthur Credit Union)
- Online banks (e.g. UBank, ING, RaboDirect, ME Bank)
- Neobanks (e.g. Up, 86 400, Volt)
Here’s a list of all the banks in Australia as of 2021.
What should I look for in a bank?
Low or no fees
It’s an unfortunate fact of life that bank accounts often come with fees. MoneySmart advises to look for transaction accounts with low or no fees that align with your spending habits. For example, if you think you’ll be using ATMs often, look for a transaction account with no ATM fees.
With your savings, you want to go for a no-fee option. This way, you can avoid your savings dwindling due to fees.
Competitive interest rates
The general rule of thumb when it comes to savings accounts is finding a high interest rate — after all, you want your money to grow.
According to MoneySmart, a competitive savings account will offer an interest rate of around 1.5%. It’s important to remember that some banks offer what is called ‘honeymoon rates’. This means the interest rate will only stay around for a short period of time and revert back to a lower rate. Before signing up, make sure to find out how long the rate will be for and what it will go back to.
When looking for the best savings account for you, have a look at the following features:
- Interest rate
- Account fee
- Minimum balance
- Maximum balance
- Linked account requirement
- Regular deposits
Consider not putting all your eggs in one basket
It might be a good idea to look into opening an account with different institutions to suit different financial needs. For example, one bank could be for growing your savings, while another might be better for home loan options. You could even consider having two different savings accounts to maximise your savings.
So, how do I change banks?
Luckily, changing banks is a lot easier than you think. Below is a simple step-by-step guide for changing banks:
Step 1: Look for a new bank
Before you sign up with a new bank, understand what your goals are and why you want to make a change. Are you wanting a higher interest rate for your savings account? Looking for a bank with a range of products (e.g. home loans, credit cards)? Or maybe you want a bank that uses smarter technology? Once you know your goals, you can get started on comparing the options out there.
Here are a few tips when comparing banks:
- Have a look for transaction accounts with no or low fees. Keep an eye out for any monthly fees, penalty rates, ATM withdrawal fees, or foreign transaction fees.
- For savings accounts, search for higher interest rates. But keep in mind that some interest rates come with requirements that you have to meet in order to earn interest (e.g. minimum balance each month, minimum number of transactions)
- Look for banks that allow you to access money that suits you, whether that’s in-person or online.
Step 2: Open a new account
Found the one? While you can set up a new account in-person at a branch, most banks offer an online sign-up process (and in some cases, only take you minutes to do). Generally, to sign up with a new bank, you will need to provide a few personal details and 100 points of identification including your driver’s licence, passport and birth certificate. After you sign up, your bank will mail your debit card within a few business days and get you to activate it once received.
Step 3: Transfer direct debits and credits
There’s a couple of options when it comes to transferring your direct debits and credits.
After you open a banking account, ask your new bank to contact your old bank for a complete list of direct debits and credits from the past 13 months. This list will show your direct debits including streaming services, utilities, subscriptions, and insurance payments. It will also include direct credits such as your wages, government benefits, and shares.
Did you know?
Alternatively, you can make a list of all direct debits in your old account and change payment details yourself.
Also, don’t forget to let your employer know you’ve changed banks so they can update your details and deposit your salary to the right banking account.
Step 4: Break up with your old account
Now, it’s time to break up. After you’ve transferred any remaining funds and updated your direct debit payments, you can close your old account. Generally, you aren’t able to close the account online so you may either have to visit your bank branch in-person or call them over the phone.
Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.
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