Hidden fees: youcan bank on 'em

LIBBY MIDDLEBROOK finds ways around cashless society's concealed costs.

We may be living in the user-pays age, but there is nothing more vexing than having to pay bank fees.

Once a month the fingers of the New Zealand banking institution creep into personal bank accounts to lift anything from $2 to more than $30 to meet bank charges incurred during the previous four weeks.

While most of us believe banks charge too much for their services, the cost of electronic transactions such as eftpos (electronic funds transfer point of sale) and ATM (automatic teller machine) transactions have crept up during the past decade, along with over-the-counter services at branch offices.

It is virtually impossible to avoid bank fees, but there are a few logical steps that can be taken to significantly reduce bank charges.

* Stay well away from the bank. It costs institutions far more money to operate branches than ATM machines because of higher overheads, therefore over-the-counter transactions inevitably incur far greater costs than electronic processes. For example, WestpacTrust charges 35c per electronic transaction for personal cheque accounts and 65c for in-house branch services such as cheque deposits.

``Going into the bank usually increases the cost of your banking, simply because it's more costly for the bank to have you in there,'' says David Tripe, Massey University's centre for banking studies director.

Since the introduction of eftpos, New Zealand has become largely a cashless society. Mr Tripe says that trend has resulted in far higher bank charges, when the best practice is to avoid using eftpos altogether.

``You shouldn't be frightened to carry cash because the transaction costs of cash are much lower and that's why the bank and other people don't charge you as much for using cash.'

'Mr Tripe says it is much easier to keep tabs on an account balance by withdrawing cash once a week from an ATM machine, rather than using eftpos for every purchase. Accounts which slip into overdraft without approval from the bank often result in fees penalties.

* Don't borrow on your credit card and pay its balance from your bank account every month to avoid interest charges. The best system for credit card payment is direct debit, which is usually cheaper than paying by cheque or through telephone banking.

Using a credit card for every purchase made can also reduce bank charges because the retailer pays the cost of the transaction rather than the customer.

Avoid using cheques as a method of payment. Bills such as rates and power can be paid via direct debit or telephone banking, which is often less expensive than cheque transactions.

``There are a limited number of things that you do need to pay by cheque. Generally it's just one-off bills.''

* Use your own bank's ATM machine. Some banks charge more than $1 every time one of its customers uses an alternative ATM. There are usually a wider range of transactions available on your own bank's ATM as well.

* Avoid setting up automatic payments and direct debit from your account if there is a chance you might not be able to meet every payment. Temporary suspension of automatic payments generally incurs high charges.

While telephone banking is a relatively new banking service, institutions are starting to increase the cost of the service.

Meanwhile, Mr Tripe says the public can expect some banking charges to increase over time, as some institutions are still offering services such as cheques and telephone banking under the cost of providing them.