Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Avoid fees, earn interest

BANK fees on everyday accounts are increasingly becoming a thing of the past. The National Australia Bank may have set the ball rolling when it declared not so long ago that it would abolish fees on some transaction accounts, however there are plenty of opportunities to minimise bank fees with other financial institutions.

Bankwest for example, offers fee-free banking through its Zero transaction account though there are strings attached. You need to deposit a minimum of $2,000 each month to have the account’s transaction fees waived. It sounds like a lot but this would typically cover most people’s monthly salary.

Quite a few banks offer this type of account. The trick is to check the fine print to see that the money only has to come into the account, without having to stay there. It’s great to save on fees but it’s also important to shift any spare cash into an interest bearing deposit, and very few everyday accounts pay a decent rate of interest.

ING Direct’s Orange Everyday account can help you make you money even if your account balance is insufficient to earn interest. With this account, ING Direct will waive the ATM fee and pay you, the account holder, 50 cents each time you make an ATM or EFTPOS withdrawal of $200 or more. It’s not a bad deal provided you can plan ahead for cash spending.

In fact, planning your regular need for cash is a useful starting point in making the most of any transaction account. Making multiple trips to the ATM – especially one that doesn’t belong to your financial institution, is an easy way to rack up foreign ATM charges that can be around $1.50 to $2.50 per transaction. If you find you need more cash while out shopping, try withdrawing funds at the same time you make a purchase via EFTPOS. This way you’ll only be charged a single transaction fee.

It also pays to keep tabs on your account balance. Online banking makes this very easy, and it’s a sensible step in planning ahead for direct debits that may apply to phone or power bills plus loan repayments.

Tracking your everyday account balance also helps you maintain the minimum needed to cover immediate bills. Transferring any surplus to a high interest online savings account will help you earn a return on your spare cash until it’s needed.

Right now many banks are paying rates on savings accounts that are well above the Reserve Bank’s official cash rate (currently 4.25%). Your money can earn as much as 6.01% with the likes of Citibank’s Online Savings account, though there is a smorgasbord of options like St George Bank’s DirectSaver or the AMP eASYSAVER paying around 6.0% or slightly less.

If interest rates continue to climb, we have even more incentive to tuck our surplus cash into one of these high interest accounts. Take a look at the Canstar Cannex website for the latest star rating report on deposit accounts to see who is offering the best deal.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Financial Literacy Foundation and chief commentator for Money Magazine.



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