Commonwealth Bank profit rises, as does St George’s fees.

This week the Commonwealth Bank announced an operating profit for the six months to 31 December of $713 million, up 15 per cent on last year.

David Murray, Managing Director of the CBA, said the result was strong, however warned of a lower full-year profit in a tough competitive environment with an uncertain economic outlook. He foreshadowed a focus on non-bank financial services and information technology.

One sector of Commonwealth's business that contributed strongly to the profit level exceeding forecasts was the increase of ‘other income’, including fee income which was up 25 per cent. Some commentators, who should know better, interpreted “fee income” as account keeping fees, where in reality it includes all fee income.

With banks now striving to become providers of a much wider range of financial services such as investment planning, superannuation and insurance products, and not just traditional banking, it should be obvious that “other income” and “fees” are going to rise strongly.

In the media interview following the result, David Murray emphasised that only 5% of the result came from transaction and account fees, and that 99% of CBA customers either don't pay or can avoid account fees.

Still it would appear that inspite of the CBA having been the leader among the banks in dropping mortgage rates to compete with mortage originators, the main story of the day was fee based, in spite of the fact that fees, while unpalatable, are in our opinion almost entirely optional.

In either a remarkable coincidence, or a stunning piece of marketing, St George Bank announced increases in their fees less than twenty-four hours before the CBA announced their profit result. As a result, the media focused almost exclusively on fees as the basis for CBA’s profit.

St George have moved both their account-keeping and transaction fees upwards, with some account-keeping fees now at $7.00 per month. They have also increased the charge for branch withdrawals to $2.00.

Now whilst we, as consumers, all hate fees and charges you have to admit that the convenience and flexibility of being able to access your funds 24 hours a day, pay bills over the phone, use EFTPOS to buy groceries, petrol, etc, sure beats the old days of making the almost daily trip to the bank and queuing up for half an hour.

This flexibility and convenience does come at a cost, but there are ways to minimise these costs.
Here’s some ideas to consider;

  • Find an account that allows a number of free transactions per month and try not to exceed the limit.
  • Where possible use phone or internet banking. The fees tend to be much cheaper than an ATM or over the counter transaction.
  • Always use your own banks network ATM for transactions, including account balance enquiries. Using a foreign ATM can cost you up to $1.50 per transaction.
  • If you’ve got a home loan with an institution consider having your savings/transaction accounts tied to it as some banks will then waive or rebate your transaction and account keeping fees.
  • Look out for, or ask about, fee exemptions or rebates which are available from some institutions if you are a pensioner, war veteran, tertiary student, disabled or a long term valued customer.
  • If you’re disciplined enough, use a credit card with interest free days for your monthly expenses and then make one transaction per month to pay off the outstanding balance.
  • Consider opening an account with a credit union or building society, as a number of these institutions do not charge account keeping or transaction fees.

So, it looks as if fees are here to stay, but hopefully the above tips will help you to avoid or keep them to a minimum and still allow good levels of convenience and flexibility.

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