The wrong account can be costly
Being in the wrong type of bank account could cost hundreds of dollars in extra fees, product ratings company Canstar says.
Canstar rates the savings products of the major banks as well as some smaller ones, such as SBS and Heartland.
The report found that someone making a few transactions a month could pay as little as $4.75 or as much as $482.64 in fees, depending on their account, while someone making an average of 40 transactions a month could pay between $19.08 and $1658.11.
People may be paying hundreds of dollars too much if they were not switching products when they should, it said.
"Many of us have a set-and-forget mentality when it comes to bank accounts. We don't tend to change our bank account structure as often as we change our spending and saving habits," Canstar's Derek Bonnar said.
He said paying a $10 monthly fee for an account with an over-the-counter facility might not be necessary for those using online-only banking.
"On the flipside, someone deciding to use their savings account as a transaction account could end up paying more than they bargained for."
Because of income tax on savings, Canstar calculated that at the current inflation rate, savers would need to earn between 1 per cent and 1.3 per cent on their savings just to break even, depending on their tax rate.
The highest interest rate among the products it surveyed was 3.9 per cent, which was available to savers who played by certain savings account rules.
An ASB economist says that over 2012, real returns on six-month term deposits across all banks were the highest they have been since 2008, thanks to low inflation and competition among banks for domestic savings.
The official cash rate has been at 2.5 per cent since early 2011, helping keep down mortgage rates but also delivering paltry headline returns to the owners of nearly $120 billion in bank deposits.
Despite that, ASB economist Jane Turner said real returns on bank term deposits had recovered to levels similar to the first half of the 2000s, when they hovered between 3 and 4 per cent.
Short-term deposits tend to earn more interest than on-call accounts.
Turner said savers' margins may change because inflation was expected to rise, so people locking money away in term deposits today may not reap the same rewards.
In general, changes to the official cash rate should even out changes in inflation, but that did not always happen in volatile times, she said.
For example, real returns from bank deposits spiked just before the global financial crisis, then plummeted into negative territory when inflation was boosted by a rise in GST.
ASB expects the official cash rate to start rising from next year, which should help offset rising inflation.
BEST IN BREED
Source: Canstar Star ratings company.
Canstar looked at fees, interest rates and other features for three breeds of saver and three types of transaction accounts. Here are its picks:
Online Saver: An online saver account managed via the internet only, with no branch access. Average account balance of $25,000, with an average of five transactions a month.
- Best products: BankDirect NZ savings account, Heartland Bank Saver, RaboDirect NZ call account.
Full Access Saver: Savings accounts with more access, such as branch and phone. Average account balance of $10,000, with an average of five transactions a month.
- Best products: BankDirect NZ savings account, Heartland Bank everyday account, TSB Bank premier cheque account.
Incentive Saver: Accounts with conditional interest rates and/or prize draws. Assumes saver makes a $2000 initial deposit, with $100-a-month deposits over five months and a $100 withdrawal on the last day of month six.
- Best products: ANZ Bank NZ Serious Saver, Bank of New Zealand NZ Rapid.
Low Transactor: People who prefer a wider range of transaction types, such as branch, ATM, phone and internet. Average balance of $2000 and average of 10 transactions a month.
- Best products: ANZ Bank NZ Freedom, ANZ Bank NZ Ready Saver, Bank of New Zealand NZ Smart Money, Kiwibank NZ Free Up.
High Transactor: People who prefer a wider range of transaction types, such as branch, ATM, phone and internet. Average balance of $2000 and an average of 40 transactions a month.
- Best products: ANZ Bank NZ Freedom, Bank of New Zealand NZ TotalMoney, Kiwibank NZ Now Acct-Flat Fee Option.
Electronic Transactor: An online account managed via internet, eftpos and ATM withdrawal from own network.
Average account balance of $2000, with an average of 25 transactions per month
- Best products: ANZ Bank NZ Freedom, ANZ Bank NZ Go Account, Kiwibank, Westpac NZ Electronic.