Bank­ing: Effie Za­hos

Lost bank ac­counts earn de­cent in­ter­est but that’s not a prac­ti­cal so­lu­tion to the yield chal­lenge

Money Magazine Australia - - CONTENTS -

The in­ter­est rate earned on “lost” bank ac­counts for the 2017-18 pe­riod was 2.13%. The av­er­age in­ter­est rate on a trans­ac­tion ac­count over the same pe­riod, ac­cord­ing Canstar data, was a measly 0.11%. For an on­line saver it was 1.19%. Sur­prised? I cer­tainly was. And to top it off no tax is payable on in­ter­est earned on a lost bank ac­count. Maybe this is why there is over $650 mil­lion sit­ting in lost ac­counts. Clearly it pays to lose sight of your money!

A bank ac­count is con­sid­ered lost if it hasn’t been used in seven years and con­tains a balance of $500 or more. All un­claimed money re­ceived by ASIC is trans­ferred to the Com­mon­wealth of Aus­tralia Con­sol­i­dated Rev­enue Fund.

Since July 2013 all lost money has earned in­ter­est. The rate is based on the per­cent­age change in CPI. Be­fore 2013 no in­ter­est was ap­pli­ca­ble.

So what does this all mean dol­lar wise? A case study on the Mon­eySmart web­site ex­plains how in­ter­est on Steve’s $1000 lost bank ac­count is cal­cu­lated. Dur­ing the pe­riod in ques­tion, a lit­tle over a year, Steve earns $30.68 on his lost money. I asked Canstar to run the num­bers over the same pe­riod us­ing the av­er­age in­ter­est rates for both a trans­ac­tion ac­count and an on­line saver, and the re­turns weren’t as ex­cit­ing – $2.44 and $26.66 re­spec­tively (see ta­ble).

While it may pay to lose your bank ac­count you are clearly bet­ter off col­lect­ing your wind­fall and putting it to bet­ter use. The catch is, of course, that if you want to earn above av­er­age in­ter­est rates on a cash ac­count you’ve got to be pre­pared to jump through some hoops. “Banks are in­creas­ingly re­ward­ing cus­tomers who show their loy­alty to them by pro­vid­ing sig­nif­i­cant bonuses when con­di­tions are met,” says Josh Sale, Canstar se­nior re­search an­a­lyst.

“The con­di­tions can range from reg­u­lar de­posits or hav­ing your salary de­posited into a linked trans­ac­tion ac­count to mak­ing trans­ac­tions us­ing an­other one of the bank’s prod­ucts. You typ­i­cally need to do a bit more work now to se­cure that higher rate.”

To find out if you are en­ti­tled to any un­claimed money, the best place to start is the Aus­tralian Se­cu­ri­ties and In­vest­ments Com­mis­sion’s (ASIC) web­site mon­eysmart.gov.au, which has records of ac­counts with in­sur­ance com­pa­nies, banks, build­ing so­ci­eties and credit unions, as well as com­pany share­hold­ings.

Click on the Tools & Re­sources link and you’ll see the “Find un­claimed money” op­tion. There are links to state rev­enue or pub­lic trustee of­fices, as they too have lists of un­claimed money.

If you do find that you’ve got some lost money, the date from which you’re paid in­ter­est will be shown in your un­claimed money search record. The in­ter­est will be cal­cu­lated from that date to 14 days af­ter your claim is ap­proved to al­low for your claim to be pro­cessed and your cheque to be is­sued.

Fi­nance ex­pert and au­thor of The Great $20 Ad­ven­ture, Money’s edi­tor Effie Za­hos, ap­pears reg­u­larly on TV and ra­dio. She started her ca­reer in bank­ing.

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