Hefty overdraft costs can hurt you

Overdrafts can provide easy but costly cash. Source: Supplied

ALMOST half of all transaction accounts offer overdraft facilities but users could be getting stung with hefty costs for falling into the red.

Data compiled by comparison website InfoChoice has found 45 per cent of transaction accounts have overdraft facilities and the amount available ranges from $100 up to tens of thousands of dollars.

An overdraft is when the amount withdrawn from an account falls below zero and the bank allows a customer to draw on a set amount of funds.

InfoChoice general manager Alastair Schirmer says they can be a useful feature but there are a few things to be considered before dipping into what is essentially a line of credit.

"Typically if you're going into overdraft there is a fee attached with that," he says.

"There are many ways you get access to credit or money, what they do need to be conscious of is what interest rate is attached. Also if there are minimum amounts which are attached to the overdraft that you have to take out at one time."

Schirmer says it's critical to weigh up the associated fees and charges of having an overdraft facility to determine whether it's worth it.

Some overdraft facilities charge an establishment fee, monthly or quarterly fees and a cost if you go over the nominated overdraft amount.

Some transaction accounts automatically come with overdrafts, while others will require the customer to apply.

Teachers' Mutual Bank chief executive Steve James says that many customers use overdraft facilities but other types of credit are proving to be more popular.

"A lot of people want to go back to the personal loan ... where there's a set repayment," he says.

"Our members still use overdrafts but they have decreased in numbers in the last 12 months or so in favour of the credit card and the personal loan - those two products are growing."

Some transaction accounts do not have an overdraft facility but will allow a customer to make a payment despite not having enough money available in the account.

Customers should be aware penalty fees usually apply for exceeding your balance and are often between $10 and $30.

View the original article here

Hefty overdraft costs can hurt you

Overdrafts can provide easy but costly cash. Source: Supplied

ALMOST half of all transaction accounts offer overdraft facilities but users could be getting stung with hefty costs for falling into the red.

Data compiled by comparison website InfoChoice has found 45 per cent of transaction accounts have overdraft facilities and the amount available ranges from $100 up to tens of thousands of dollars.

An overdraft is when the amount withdrawn from an account falls below zero and the bank allows a customer to draw on a set amount of funds.

InfoChoice general manager Alastair Schirmer says they can be a useful feature but there are a few things to be considered before dipping into what is essentially a line of credit.

"Typically if you're going into overdraft there is a fee attached with that," he says.

"There are many ways you get access to credit or money, what they do need to be conscious of is what interest rate is attached. Also if there are minimum amounts which are attached to the overdraft that you have to take out at one time."

Schirmer says it's critical to weigh up the associated fees and charges of having an overdraft facility to determine whether it's worth it.

Some overdraft facilities charge an establishment fee, monthly or quarterly fees and a cost if you go over the nominated overdraft amount.

Some transaction accounts automatically come with overdrafts, while others will require the customer to apply.

Teachers' Mutual Bank chief executive Steve James says that many customers use overdraft facilities but other types of credit are proving to be more popular.

"A lot of people want to go back to the personal loan ... where there's a set repayment," he says.

"Our members still use overdrafts but they have decreased in numbers in the last 12 months or so in favour of the credit card and the personal loan - those two products are growing."

Some transaction accounts do not have an overdraft facility but will allow a customer to make a payment despite not having enough money available in the account.

Customers should be aware penalty fees usually apply for exceeding your balance and are often between $10 and $30.

View the original article here

Bank costs down but no rate cuts to follow

WHOLESALE funding costs for banks are improving but any moves by the major lenders to independently cut rates are unlikely to be made until next year, according to a new report.

The cost of wholesale funding for banks is now lower than their average debt portfolios - the first time this has happened since the start of the global financial crisis. But any benefit will take at least until 2014 to work its way through to mortgagees, the Australian Mortgage Industry Report released by JP Morgan found.

"Funding costs have been elevated for a sustained period of time so it will take a sustained period of time for the average cost of funds to start to come down,'' JP Morgan banking analyst Scott Manning said.

The investment bank also warns lower funding costs for banks may not translate into lower interest rates for existing borrowers as lenders may choose to increase returns to shareholders or cut interest rates to new borrowers to win more business.

The growth rate in housing credit, which has been in decline since 2003, is also likely to have bottomed out providing further growth opportunities for lenders.

The growth rate of new housing loans bottomed out at 3.7 per cent in October but has since risen to 4.5 per cent in February.

But report warns the market will not see “run-away credit growth” any time soon.

john.dagge@news.com.au

 

View the original article here

Bank costs down but no rate cuts to follow

WHOLESALE funding costs for banks are improving but any moves by the major lenders to independently cut rates are unlikely to be made until next year, according to a new report.

The cost of wholesale funding for banks is now lower than their average debt portfolios - the first time this has happened since the start of the global financial crisis. But any benefit will take at least until 2014 to work its way through to mortgagees, the Australian Mortgage Industry Report released by JP Morgan found.

"Funding costs have been elevated for a sustained period of time so it will take a sustained period of time for the average cost of funds to start to come down,'' JP Morgan banking analyst Scott Manning said.

The investment bank also warns lower funding costs for banks may not translate into lower interest rates for existing borrowers as lenders may choose to increase returns to shareholders or cut interest rates to new borrowers to win more business.

The growth rate in housing credit, which has been in decline since 2003, is also likely to have bottomed out providing further growth opportunities for lenders.

The growth rate of new housing loans bottomed out at 3.7 per cent in October but has since risen to 4.5 per cent in February.

But report warns the market will not see “run-away credit growth” any time soon.

john.dagge@news.com.au

 

View the original article here

Bank costs down but no rate cuts to follow

WHOLESALE funding costs for banks are improving but any moves by the major lenders to independently cut rates are unlikely to be made until next year, according to a new report.

The cost of wholesale funding for banks is now lower than their average debt portfolios - the first time this has happened since the start of the global financial crisis. But any benefit will take at least until 2014 to work its way through to mortgagees, the Australian Mortgage Industry Report released by JP Morgan found.

"Funding costs have been elevated for a sustained period of time so it will take a sustained period of time for the average cost of funds to start to come down,'' JP Morgan banking analyst Scott Manning said.

The investment bank also warns lower funding costs for banks may not translate into lower interest rates for existing borrowers as lenders may choose to increase returns to shareholders or cut interest rates to new borrowers to win more business.

The growth rate in housing credit, which has been in decline since 2003, is also likely to have bottomed out providing further growth opportunities for lenders.

The growth rate of new housing loans bottomed out at 3.7 per cent in October but has since risen to 4.5 per cent in February.

But report warns the market will not see “run-away credit growth” any time soon.

john.dagge@news.com.au

 

View the original article here