When your bank lets you down

As recent behaviour from the Big Four banks make customers think about taking their business elsewhere, the time is right to consider changing banks.

You may have read some disturbing news lately about what’s been happening at Australia’s Big Four banks – ANZ, CBA, NAB and Westpac – courtesy of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Evidence gathered could allow commissioner Kenneth Hayne to find that each of the major banks breached the Corporations Act and National Credit Act on numerous occasions, according to senior counsel assisting Rowena Orr, QC. Possible legal breaches relate to the banks not acting “efficiently, honestly and fairly” and failing to protect customers from conflicts of interest relating to broker and banker remuneration, she said.

Many of us are reluctant to change banks because of the perceived hassle, but the good news is it’s relatively easy (see How to Switch Banks, right). And many smaller banks, building societies and credit unions provide better products. On top of that, customers generally record higher satisfaction rates.

If the ethics of your bank are making you think of switching, you don’t need to worry that you will suffer from lesser products or services from a smaller bank. And the same government guarantee of deposits up to $250,000 applies to all Australian banks, building societies and credit unions, regardless of size.

Most of us are home-owners

– or aspire to be – so mortgage products are important. Of the 10 cheapest home loans on offer at time of writing (comparison rates ranging from 3.6 to 3.8 per cent) only one came from a Big Four bank, NAB. And another two came from subsidiaries of the majors, according to data on the RateCity website (ratecity.com.au). HSBC offered the best rate and Bank Australia (customer-owned) and CUA (a credit union) came equal second.

With official interest rates at historic lows some savings accounts pay no interest. The top five best-paying accounts without introductory incentive rates offer between 2.85 per cent (ME Bank) and 2 per cent, according to RateCity data. Of these only one comes from one of the majors, the Westpac Bump account which is fourth, and one from a Westpac subsidiary, Bank of SA, at fifth place.

Car loans are also important and smaller lenders offer better deals. Comparison rates for the five cheapest car loans of $20,000 ranged from 5.99 per cent (loans.com.au) to 6.38 per cent (RACV) at the time of writing, according to RateCity data. None came from a major, with 16th the top spot that ANZ could muster with a comparison rate of 11.87 per cent.