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The Forum > General Discussion > How to Beat the banks.

How to Beat the banks.

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Gidday Yabby,

I don’t need reminding, I just ignored this part of your comment. Your concept that every working Australian is a bank shareholder is absurd. There is a very real difference between being a shareholder and having superannuation with a fund that is an institutional investor in a bank. Think direct voting rights, sale rights, dividend distribution rights et al. Either there are some concepts that 17 year old girl didn’t teach you, or you are deliberately trying to pull the wool.

Unlike your St George example which was also misleading, I can't easily confirm your accuracy on the CBA margin or more importantly, how it compares to other lenders in the snapshot you have written about.

Regardless, I absolutely agree that competition from deregulation pressured banking margins. Your observation is timely and very important. However my point was more about privatisation. For better or worse, CBA ‘profit’ was controlled by and directed to the government. Unlike you, in the ideal, the government governs for the people, not the individual.

Whilst I share your view that banks need to be sustainable. The questions for us as a society are, how profitable and at what cost?

As for your chance lesson from a 17 year old girl, it’s great that this completely luck based event lead you to such a satisfying investment strategy for yourself. Imagine where you could be, if you had not met this switched on lass or she had instead suggested to you to buy a large chunk of land in suburbia, which you might one day sell to developers for an enormously increased amount.

Your apathy and disregard for those who have not been so lucky is distasteful and, I suspect, at the heart of this issue of all those like you. Success, knowledge and intelligence are the poor cousins to compassion, empathy and decency. Fortunately for some, they are not mutually exclusive.

Mortgageinsider (Mick)
Posted by mortgageinsider, Wednesday, 14 May 2008 2:10:56 PM
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Wayne Swan, prior to the budget, suggested the government might introduce laws to make it easier for customers to change banks without incurring fees hence making the changeover relatively easy and painless. This was with the aim of making banks more competitive again and reducing the strength of the monopoly. Would it work? I don't know but the cynic in me thinks the banks would just collude more to reduce choice each becoming a pale carbon copy of the other.

Anyone know the status on this proposed policy? Is it being seriously looked at?

We always question ridiculous charges on our accounts such as the annual fee to retain our Rewards Visa (two cardholderss but on one account) so charged twice ($80 total) for the honour of having the Visa. We went into to cancel the Visa because of the charges and they bank refunded the charge. Next year same story and had to do it all over again. It is laughable.

We would move to another bank but many are worse and there is always the risk of some new charge rearing its ugly head in the future?
Posted by pelican, Wednesday, 14 May 2008 2:47:10 PM
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Yeah it amazes me why nobody seems to shop around. When ANZ decided for me and my partner to have a VISA card with rewards should cost $165 a year, while rewards were capped at $3500 spending a month, I found Earth Card at $40 a year where rewards aren't capped at all.

I even mailed ANZ and asked how they could possibly compete and they didn't reply? Same as I said earlier about advertising a $5 a month current account. Are people hypnotised by the ANZ blue? To me it's like ANZ saying, 'Hey Look! Our product is a complete rip off!' And the customer saying 'Oh, yes it is. Can I sign up!'

I suppose it's like people paying for Big Pond ADSL at $65 with 400Mb (Unlimited they call it) download limit.
Posted by Usual Suspect, Wednesday, 14 May 2008 4:13:51 PM
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The Australian Banking system is a shameless cartel.

I defy anyone to point out a significant difference in charging policy between any of them. They increase their rates in harmony, they collude on the length of time it takes to clear a cheque (when in fact, the transaction is electronic and instantaneous), they find new ways of gouging fees, and implement them like so many Olympic synchronized swimmers.

On the topic of cheque clearance, I deposited a (sizeable) cheque into my company's account on a Thursday, noting not only that i) both parties to the transaction used the same Bank, but that ii) the payor's account was actually at the very Branch where I lodged the cheque.

The funds were not available to my company until the following Wednesday.

I was particularly incensed by this, especially having been a customer both business and personal for twenty-plus years, and got onto the phone to other Banks, to see if they wanted my accounts.

Every one of them stated that they would have done the same.

Apart from the basic iniquity, where the Bank has free use of these funds for five days, when they had control over both sides of the transaction, the sheer bare-faced cheek that they can all collude in this theft is the most shameful part of it all.

We put up with it only because we don't have a viable alternative.
Posted by Pericles, Wednesday, 14 May 2008 4:23:56 PM
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MI, why is my concept absurd? At the end of the day, most bank profits land up
in the accounts of super fund members, which means nearly all workers in
Australia. You are free to change super funds, (most people are) You are free
to run your own super fund, you are free to tell your super fund what you think
of the shares that they buy. If you really feel so strongly about voting, so buy
2 shares and go to the bank AGM.

The St George example was not misleading. Most of their money is lent for housing
loans around 9.5% and that money is costing them more these days, the last few
hundred million cost them 8.5%, as they don’t yet have as good a rating, as the
big four. Last time I looked Bendigo was worse, at BBB, so overseas funds
would be even more expensive for them. That is exactly why the mortgage providers
are baling out, as there is a flight to quality.

*Unlike you, in the ideal,
the government governs for the people, not the individual.*

Hehe, you must be kidding. Everyone is busy furthering their little patch of self
interest. Politicians do what might get them reelected, public servants do enough
to hang on to their safe and cushy jobs. Give them a monopoly on banking or anything else, they will do what people do in that case, spend a lot of time looking
out the windows, watching the cars go by. That’s why we need competition.

For my personal accounts I play one bank against the other. In my experience everything is negotiable these days with banks. In one account, they clear all
cheques in a day, the other account takes 5 days. Neither is really a drama to me.
What I have learned is don’t ask the teller, she just parrots what she has been told.
If you want a deal, go to the manager or his/her superior, who can actually make
decisions.

Gail Kelly is known for improving consumer service, so I’d say that things will
improve dramatically at-Westpac.
Posted by Yabby, Wednesday, 14 May 2008 8:36:07 PM
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Hello Pelican,

I think that it is extremely unlikely that Wayne Swan has made any progress on home loan exit fees as I think these are sound bites rather than an intended policy.

In the extraordinary event he makes any progress, the most likely outcome will be for lenders to blend the cost into some other part of the loan, either by amortising into the rate, adding it to ongoing fees or pitching it into the setup costs or combinations of all of these.

There is another gobsmacking aspect that Swan’s does not address and that is the establishment cost of the loan that borrowers want to refinance out of. Many of these charges are not included in comparison rates and buried deep in disclosure, so borrowers either don’t really notice them, or pick them up when it is too late. A classic significant cost is Lenders Mortgage Insurance. This mostly non-refundable premium often makes exit fees pale in comparison, as it is regularly $3,000 - $4,000 and because it’s non refundable and non transferable, when you switch lenders, you write that money off.

There is a plan that helps ease these costs as well as reduce interest rates on residential mortgages that has been sitting on the governments desk gathering dust since 2007. Swan has a copy and has done nothing. There is now a petition to build pressure for the government to respond, which I linked to early in this discussion. I haven’t relinked it here, because I am not sure if doing it again breaks the rules.

Anyhow, I did start the thread and I hope you take time to find it, sign the petition and spread the word.

Thanks

Mortgageinsider
Posted by mortgageinsider, Wednesday, 14 May 2008 8:46:51 PM
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