A number of banks have quietly cut the interest rates on savings accounts without informing their customers, leaving many savers unknowingly worse off.
Many banks are now borrowing money from their customers below the official rate of 2.25 per cent – some even as low as 0.01 per cent.
The eagerness of many banks – including ANZ, NAB, and Commonwealth Bank – to cut the rates they pay customers, is starkly contrasted by their refusal to lower rates they charge customers on credit cards and business loans.
This eagerness is further emphasised by the fact that, while many banks have said they will lower mortgage rates, they have taken several weeks to act on this promise, while cutting savings account rates immediately.
Strategies like this help the big banks achieve their mega, multi-billion-dollar profits at the expense of consumers.
Which banks, what rates?
According to comparison website finder.com.au, nine providers have dropped interest rates since the Reserve Bank cut the cash rate by 0.25 per cent on February 3. In addition to the three mentioned above, they are UBank, Citibank, ME Bank, ING Direct, RaboDirect and People’s Choice Credit Union.
Of these nine, the worst rate was Commonwealth Bank’s Goal Saver Account base rate of 0.01 per cent. The best was RaboDirect High Interest Savings Account DIY Super, with a base rate of 3.14 per cent.
It should be noted that some of the banks that have not lowered their rates already had rates lower than the cash rate. St George and Bank of Melbourne (which are the same bank, and owned by Westpac) both already had base rates of 2.25 per cent.
Why you need to know
A 0.25 per cent change may seem small – on a $20,000 deposit it will cut your annual interest earnings by $50 – but taking into account compound interest, and the fact that the official rate is likely to continue to fall, this can quickly add up to a loss of hundreds, even thousands, of dollars.
It is therefore in customers’ interest for banks to inform them when they make a change to their savings account.
Hiding behind antiquated laws
None of the banks The New Daily spoke to offered a clear explanation of why they do not inform customers of rate changes. However, while none of the banks directly informed customers of changes, it is not strictly true that they do not publicise changes in rates.
Under an antiquated compliance rule, banks must take out an advertisement in a national newspaper publicising any change to interest rates.
On Thursday, for example, AMP took out an advertisement in The Australian advertising a long list of interest rate changes, under the heading ‘Notice to AMP Bank customers of changes to interest rates’.
But this advert appeared on page 22 in the business section of the paper next to an article headlined ‘Banking sector welcomes APRA’s shift in tone’ – hardly the place you would expect a retired nurse or a construction worker saving for a mortgage deposit to be looking.
While this rule may have made sense when print media was the main source of news, with circulation plummeting and the majority of readers accessing their news online, it is now an outdated formality that serves no one but newspapers (in ad revenue) and the banks themselves.
The details of the rule were shadowy, but The New Daily gleaned that banks need only publish the changes once in one national paper, and not in the online version.
A vote for transparency
Pointing to this lack of proactive transparency, finder.com.au spokesperson Michelle Hutchison said: “Financial institutions shouldn’t feel like they can’t disclose these rate changes like they do with their variable home loan announcements.
“It’s a shame that they are potentially hiding these rate cuts by not announcing them. What this means is that savers need to keep track of their accounts and they can’t assume that if they haven’t seen a rate announcement that their rates won’t be dropping.
“It also shows that more savings accounts could fall before the majority of variable rate home loan changes come into effect from February 20.”