Switching: it’s up to you
Consumers need to shake off a shocking case of apathy if they ever hope to secure a better deal.

In recent times, Australians have sledged the banks with a fervour usually reserved for politicians and petrol prices. No topic is as guaranteed to keep the conversation ticking at a dinner party. Interest rates? A disgrace. The fees? Astronomical. The customer service? You get better from foreign call centres. Now pass the the cabernet sauvignon, darling.

For all our whining, few of us seek better deals elsewhere. A survey from the consumer group Choice last year showed only 7.6 per cent of Australians switched bank accounts in the past two years. Almost 80 per cent had never given switching a thought. The reason? Most thought it was too hard.

Apathy is rife and, clinical psychologist Grant Brecht says, financial institutions rely on it. “They know a good percentage of people stay, no matter what service they receive,” he says. “People only break the inertia when things become so bad they can see that others are better off.”

For most who make a change, poor customer service is the deal breaker. Others find better rates elsewhere.

Fees and accessibility are also important considerations.

“You want to make sure you get the terms and conditions to check you are actually moving to a better account,” Greg Kirk, from the Australian Securities and Investments Commission, says.

Such research might sound onerous but online services, including Canstar Cannex and Rate City, make it possible to compare accounts with the click of a mouse. Choice offers an internet comparison tool called Compare, Ditch and Switch.

Sometimes, threatening to switch is enough to secure a better deal from your current institution. If not, there are ways to minimise the hassle.

“It’s not as difficult as people often think,” Kirk says.

“And there are better deals out there, so it could be worthwhile.”

Those with automatic payments flowing from a transaction account are often reluctant to switch. In the past, it was time-consuming to rearrange such regular payments as rent, electricity bills and ongoing loans. In 2008, however, the government introduced rules to simplify the process. Your existing financial institution must provide a list of direct-debit and credit arrangements made during the past 13 months. Your new institution must rearrange the payments on your behalf or provide the necessary paperwork.

Swapping one financial institution for another is more complicated – and expensive – for those with mortgages. There are administrative costs involved in discharging a mortgage. Some institutions charge exit fees, though these will be banned on new home loans taken out after July 1. The new institution will usually charge an application fee and seek a property valuation. ASIC has an online calculator to show mortgage holders whether switching is worthwhile (

“The most difficult thing to switch is the mortgage,” the chief executive officer of the Australian Payments Clearing Association, Chris Hamilton, says. “But it’s worth thinking about whether you need to change everything. You could set up a regular payment from your direct-debit account to pay the mortgage at another institution. “That’s not hard and it means you can shop around for banking products.”

Choice says the switching process is still too complex. A Choice spokeswoman, Ingrid Just, points to the costs sometimes involved in transferring sums too large for internet banking. Portable account numbers, she says, offer a solution.

The federal government has commissioned a study into the feasibility of a system where customers take one account number – and all attached payments – from place to place.

“By increasing the number of people who switch, we will have a more competitive banking sector,” she says. “It will put them under pressure to provide good service and a good product range.”

Four steps to making the change

1. Set up your new transaction account. Leave your old account open with some money in it to cover any automatic payments to be made during the change.

2. Ask your current financial institution for a list of your regular direct debits and credits. This servicemay cost a small fee. You can also find the information

in your account statements.

3. Take the list to your new institution. They will help you re-establish the payments on the new account.

4.When all automatic payments have been updated to your new account, close your old account.

Care factor is the clincher

GrahamWhitehead had been a Westpac customer for more than a decade when the bank announced it would raise interest rates above the Reserve Bank’s official increase. ”It sent amessage that they really didn’t care about their customers,”he says. ”I didn’t want to support a company with that business ethic.” He shopped around and joined a credit union in the shopping centre across the road from his office in North Ryde. With just 3300 members, Laboratories Credit Union caters to people who live and work locally. ”I can tell they recogniseme when I walk in,”Whitehead says. ”There’s a customer service focus.” When he has transferred all his direct debit payments to LCU, he will close theWestpac account. ”There’s no rush,” he says. ”It’s turned out to be less difficult than I thought . . . I can’t think of any reason you wouldn’t do it.’ ‘

Posted by Louise Schwartzkoff – The Syd on 23rd February, 2011