Hidden fees and bonus interest

The Consumer's Institute has a calculator on its website, which enables subscribers to compare two current accounts and work out which is cheapest. When I entered my typical banking pattern into the calculator the fees ranged from $4.82 a month, to a staggering $51.65. Five banks charged more than $30. To put this into perspective, $51.65 invested at 7.50% over 20 years would return $28,853.26 before tax. That's a lot of money to lose.

You owe it to yourself to stop paying these fees. Some of the top ways to do this include:

• Negotiate hard if you have lots of business with a bank. Remember, being in debt makes you a good customer not a bad one - providing you do make repayments.
• Choosing a fixed fee account where you pay one sum for as many transactions as you make every month.
• Consider getting a revolving credit mortgage if you're suited to this type of investment. You'll often pay lower fees by having your mortgage and current account in one.
• Get a high balance account, where you keep a minimum balance of around $5,000 in return for no transaction fees. Beware, however, that you're not losing too much interest on the $5,000.
• If you're young, old, in fulltime study or have graduated recently, you should be able to negotiate the transaction fees away. The chances are you won't be told about this, says the Consumer's Institute. So make sure you're getting what you're entitled to.
• Change your behaviour. Think twice before you whip out your card. Eftpos fees soon add up. Perhaps you should be using a credit card instead, or getting cash out at retailers each time you find that you must use the Eftpos card, rather than paying to withdraw it at a hole-in-the-wall machine.
• Save money by banking online. In most cases you'll pay nothing or considerably less for an online transaction compared with a telephone or branch transaction. The more you can switch to online services, the more you save.
• Read the fine print. Be aware of what you'll be charged additional fees, if for example, you spend beyond your overdraft limit.
• If you are charged fees, be it one-off or ongoing, argue your case and have them removed.

Don't be a mug by being too loyal to your bank. Shop around and get a good deal.

High charging banks don't just have fees up their sleeves. You also need to watch out for Houdini-style disappearing interest rates. For example some banks offer high interest rates on online call accounts providing you have a minimum deposit of say $2,000. Whilst you may get 7% interest or more on these accounts, drop below that level and the interest rate drops to zero. Ouch.

Another common trick is the bonus saver-style account. With these accounts you'll get paid a high rate of interest providing you make at least one deposit a month and no withdrawals. Every month that you make a withdrawal, you're penalised by perhaps 1.5%, making the overall interest you're paid, not all that attractive at all.

Finally, beware of high interest savings accounts that quietly drop the interest rate once the marketing campaign to get new customers is over.

Diana Clement
Independent Financial Commentator