Simple steps to cut banking costs and save big – Diana Clement

Interest and margin fees can often be avoided. Photo / 123RF

THREE KEY FACTS

• Banks profit from fees, interest, and margins that can often be avoided with simple changes.
• Paying with Eftpos and negotiating fees can save money on transactions and credit card costs.
• Wise and Revolut typically charge about 0.5% on credit card exchange compared with 1.8% to 2.8% on NZ bank cards.

Banks are raking in billions while everyday Kiwis are paying fees, interest and margins that can often be avoided. If you’re tired of being part of your bank’s bottom line, a few simple changes can ensure you’re paying the minimum, not being bled dry.

Convenience costs. Few people stop to think about the 2% or 3% payWave and other surcharges retailers often add to purchases. It adds up quickly in bite-sized chunks when you use cards where surcharges apply. Credit card payments cost retailers 0.7% for contactless debit and 1.2% to 1.5% for credit, according to the Commerce Commission. So it’s not just banks and card providers taking a cut. Retailers often take a margin too. Paying with Eftpos can save you a lot over a year. If there’s a charge online for using credit, look for online Eftpos or other cheaper options. If credit is your only way to cover daily essentials, seek budgeting advice.

Cut down on bank fees. Most banks’ standard accounts are fee-free these days, which is great news. Check your statement to see what fees you pay each month. It might be overdraft facility fees or dishonour fees. There might be manual transaction fees or paper statements. Consider other ways to bank that avoid these. When I lose a card and need a replacement, I always mention to staff that I know they can waive the charge, and they do. If there’s a fee for phone transactions, ask if it can be removed or if there’s another free option.

Pay off credit cards, loans and overdrafts on time and in full. Avoid interest and late fees: always pay your credit card bill in full and on time to dodge high rates and penalties. Consider putting full repayments on direct debit. Banks don’t like this because they don’t profit from you, but they will do it. If you don’t recoup your annual card fees from points or air miles, switch to a no-fee card or a Visa debit to avoid interest altogether. Set up account alerts to avoid overdrafts and hefty fees.

Don’t pay offshore service margins. If you’re buying from overseas or travelling, consider a low-cost multi-currency card such as Wise or Revolut. NZ credit card exchange rates are poor compared to these and often loaded with offshore service margin fees. Wise and Revolut typically charge about 0.5% on exchange compared with 1.8% to 2.8% on NZ bank cards. Overseas ATM withdrawals are often free or cheaper. Beware that NZ-based alternatives such as Cash Passport and Travelex Money Card often come up on social media from people justifying poor choices. They’re expensive. On the downside, Wise and Revolut are regulated in Europe, not here. So keep your balance low.

Shop around and switch banks. Look closely at your spending and see if you would be better off with another bank, credit union or challenger “bank”. Mix and match to find the best deal for savings, credit cards or home loans. Like me, you might prefer one bank’s “free” credit card travel insurance, or mortgage, but find other services cheaper/better elsewhere. Challengers such as Emerge, Dosh, Debut and Revolut, now offer services that could replace some or all of what you use your current bank for. Most banks now make it simple to move accounts and direct debits.

Negotiate for better rates and deals. If you have a mortgage, consider using a broker to haggle the rate. This doesn’t always involve remortgaging. Small reductions add up over time. Individuals can negotiate, but brokers don’t charge you and often get better deals. Banks are under pressure to compete and may negotiate. If you’re good with your money, use a revolving or offset mortgage to cut costs.

Analyse your accounts to make savings. Use your bank statements to your advantage. If you’re good with Excel, download and analyse your spending there. AI can analyse statements in PDF format and suggest savings. When I did this, it listed my subscriptions and highlighted one particular cafe where spending could be cut.

Finally, don’t put this in the too-hard basket. Banks profit handsomely from your habits. Stop, pause, and engage in keeping more of your money in your own pocket.