Diana Clement: Change your ways for fee free banking

There are some real gotchas when it comes to bank fees Nobody likes paying bank fees. It's often only 50c here or $2 there.

But they can add up to a large sum of money - often hundreds of dollars - over a year. That's money that's best saved, or at least spent on something nice.

Don't get me wrong. Banks need to make money one way or another. I just want to make sure neither I nor my readers are paying more than their share.

There are some real gotchas when it comes to bank fees. I've been on record before at being annoyed at the $2 it costs to set up a regular payee on ASB's FastNet online banking.

Kiwibank charges nothing for this - although a very honest spokesperson for that bank once said to me that it was swings and roundabouts and his bank charged for things that the ASB didn't.

Setup fees for something such as an automatic payment (AP) that doesn't require human interaction really irk me.

Even worse, charging the same fee to change those automatic payments is extortion, in my book. That is particularly pertinent thanks to the GST rise, which will force people to change their APs in the coming weeks.

It's quite possible to do zero-fee banking. Other than my annual Visa card charge, which I recoup a couple of times over in rewards point vouchers, I pay nothing for my regular banking.

This only came about after I came off mortgage-related fee-free banking. I started questioning an ASB staff member about how to get a better deal.

I brainstormed with the member of staff (thankfully for free), changed accounts and then moderated my behaviour. More than 20 years of paying bills by cheque was replaced with direct debits, automatic payments and online payments - saving me time and hassle as well as money.

It's those behavioural changes that often pay the biggest bonuses. That's especially the case for the breed of bank customers who bounce cheques and automatic payments regularly.

Diane Maxwell, head of external affairs at the BNZ, cites as an example her bank's Rapid Save account, which at present pays a healthy 4 per cent interest. The account allows one free withdrawal a month, but after that you pay $5 a pop - which cancels out the decent interest rate.

"People can slip into the habit of making regular withdrawals and thinking each time that $5 isn't much, but it adds up. So it's worth checking what it costs to withdraw from your savings account."

No one's perfect. A case in point was one of my Kiwibank accounts that had me outsmarted until recently. I had no idea, and I mean NO IDEA, that it was a bonus saver account, which meant I was being penalised with a reduced interest rate for making more than one withdrawal a month. I didn't change my behaviour in this instance. Instead I moved that money out of the Kiwibank On-line call account to get a better interest rate.

One way to change your behaviour is to use text and email alerts offered by most banks. If, for example, you're someone who incurs honour or dishonour fees (and don't want to switch to the BNZ), you can set up alerts to text or email you should your balance go below a certain level or if an AP was due to fail for insufficient funds.

Beware, however, there are even fees associated with these automatic alerts. At the ASB it's 20c a text alert and 5c an email alert. These can add up. Westpac's email alerts, and the first 10 texts, are free.

Another way to avoid penalty fees is to use a sweep-type service. With Kiwibank's Sweep services you select a minimum and maximum amount to keep in your everyday account. Everything over that amount is swept into your nominated account (which probably pays a higher interest rate). If your balance falls too low, money is swept back.

Banks will also tell you how to reduce your fees - if you ask. Westpac, I notice, has a "Reducing costs" page on its website, suggesting, among other things, splitting your pay between your accounts as it comes in, rather than transferring money between accounts.

You may be aware of the day-to-day fees and manage to avoid them. Sometimes it's the penalty fees lurking in the fine print that catch people.

Journalists like me used to harp on endlessly about the unfairness of honour and dishonour fees. Then the BNZ dropped them. In the blaze of publicity that followed, other banks "dropped" their honour and dishonour fees.

It costs banks around $1 to dishonour a transaction, yet customers were charged as much as $35 a time. The banks argued that it was designed to change behaviour, not to rake in revenue.

The reality is that most didn't follow the BNZ's bold move. The ASB still charges $20 for a dishonoured cheque or bounced automatic payment or direct debit, Westpac $9, Kiwibank $7.50 and TSB Bank $7.

I notice this week that the words "honour fee" seem to have disappeared from banks' fee lists. There are, however, similar fees. Kiwibank has an "account out of order fee". Instead of charging every time the bank honours a payment you don't have money to cover, it charges you $10 a month plus interest for unauthorised overdrafts exceeding $10.

I've also heard that some banks are no longer honouring payments and charging a fee. They're simply dishonouring them, which comes with its own fee.

Banks publish their fees online - Google "Kiwibank fees" or "Westpac fees" and you'll find the relevant page fairly easily. But doing comparisons can be time-consuming.

Consumer has a useful bank fee calculator on its website (albeit for members only), which is a starting point for comparing accounts. When I entered my details, it came back with four accounts that would be completely fee-free for me - two from HSBC, one from Kiwibank and a National Bank account.

At the other end of the scale, Consumer's calculator says a Westpac Earning Account would be costing me $24.25 a month, even with my modified online-only behaviour.

Hints:

* Think before you make any transaction. Do you really need to go to the counter at the bank?

* Juggle your cards. If you're going to pay a fee with your Eftpos card, use your Visa or Mastercard instead, or vice versa.

* Pay online. As BNZ's Maxwell points out, cheques are very expensive. "You pay for the chequebook, envelope and stamp, plus the time to go to the post box. An electronic payment clears overnight, no paper needed and you don't have to leave the house."

* Haggle. If you do lots of business with your bank, such as mortgage, insurance and other products, argue that they should waive your fees. Sometimes suggesting to your bank that you're looking elsewhere will do the trick.

* Credit unions and lesser known banks such as the HSBC, TSB, PSIS, SBS Bank, might provide you with a better deal.

This exercise shouldn't be limited to your current account. Do it for loans, credit cards, mortgages and other bank products and you could save even more money.

There are some nasty fees associated with mortgages. The TSB Bank, like many others, has a long list such as: rearranged security fees, transfer to family trust fees, change of loan facility fees, holiday payment request fees and so on.

Once again, behaviour can affect the fees you pay. If you've got a revolving credit mortgage you'll pay a $10 a month management fee at the TSB Bank, but this can be swapped for a drawdown fee of $2.50.