Banking

Banking has changed. New products and electronic services have brought fresh opportunities but new risks.  We talk about the problems and opportunities.

Choosing your bank

Your bank needs to be secure, flexible, friendly, easy to use and low cost. It should also give good financial returns.

However, bank services vary widely. Fee and interest structures also differ, so shop around to find the bank best suited to your needs. Even if you have been with your bank for many years, it's never too late to change.

Ask prospective banks to put together a package of accounts and services that work to your best advantage, minimising charges and maximising your returns.

Banking for people with disabilities

We've been working, along with other organisations, with the NZ Bankers' Association to make banks more responsive to the needs of older people and people with disabilities . They have now (November 2009) published a set of guidelines. The voluntary guidelines recommend initiatives such as low teller counters, user-friendly ATMs, better wheelchair access, user-friendly layouts, and training staff to identify financial abuse. The code can be downloaded as a PDF by clicking here. Ask your bank if they meet the guidelines. 

Interest

Check the small print regarding interest payments. Some accounts calculate interest on a daily basis, while others calculate interest on the minimum monthly balance or the average monthly balance.

Some accounts pay a single rate of interest on the whole sum of money saved, while others pay marginal interest on savings made over a specified amount. Some banks pay no interest on balances below a certain level.

It is probably best to operate a savings account that calculates interest on a daily basis, pays a single interest rate on the whole sum of money saved and pays interest right from the first dollar. However when considering these options, make sure the fees don’t outweigh any gain.

Fees and Charges

If your NZ Superannuation is credited directly into your bank account, most banks will not charge you base or transaction fees on that account. Crediting super to your cheque or current account will save you money as this will be your most active account and the most expensive to operate. Normal fees would still apply on any other accounts..

• Check out the fees applicable on your accounts.
• Consumer regularly surveys bank fees and this is worth consulting for current bank charges across a wide range of accounts.
• Reduce bank fees by using electronic transactions which are cheaper than manual ones (i.e. bank tellers).
• Inoperative accounts cost money. Close accounts you don't need.

Automatic Teller Machines (ATMs)

To use an ATM, you need a card and a four digit personal identification number (PIN). When you choose your own PIN, choose a number easy for you to remember but do NOT choose your birth date or a number anyone could easily guess. Keep your PIN secret and don’t write it down or tell it to anyone. If you forget your PIN, ask your bank branch for help but don’t even disclose your PIN to the staff.

You may feel uncomfortable withdrawing money from a footpath ATM or at night. Check out ATMs inside banks or businesses or get your cash at the same time you make a purchase using EFTPOS.

If you lose your card or think someone else has your PIN, immediately tell your bank or call their free 0800 number. If you have followed the rules set by your bank, any liability from unauthorised transactions should not exceed $50.00.

Electronic Funds Transfer at Point of Sale (EFTPOS)

With EFTPOS you can pay for goods or services at the point of sale, instead of writing a cheque or using cash.

How to use EFTPOS

• The shop assistant will ring the total up on the till, as normal
• you or the shop assistant (store layouts vary) will then insert your EFTPOS card
• check the amount showing on the small handheld screen is correct (or ask to have it confirmed)
• select the account you want to use (usually the top row of buttons) 
• key in your PIN, usually followed by 'enter'.

Money is then transferred from your account to the merchant’s account.

Retailers also usually let you withdraw cash with your purchase and this means you can get your groceries and your cash without ever going to the bank. You will reduce bank fees as this will all be counted as one transaction. It helps the retailer too as it can reduce the cash-handling fees that banks charge them.

Telebanking

Banking by telephone is an easy way of paying bills, transferring funds, accessing account balances, and ordering statements and cheque books. You can do it with any modern telephone or mobile phone. Some banks now also offer some services via texting.

Get your bank to set up this service. You will need a PIN if you don’t already have one. Once arranged, telebanking is easy. You ring the telebank number, and a pre-recorded voice will then guide you through the steps using your phone buttons.

Generally there are no base fees for signing up for telebanking but some banks charge additional fees for telephone bill payments. Some banks may also charge fees for each telebank call, or charge after a specified number of free calls.

Internet banking

All banks now offer secure websites where you can do most banking transactions. You will usually have to be set up for telephone banking first, and your bank will add Internet banking to your service. Most Internet banking is free, but usual transaction charges will apply. You will require an email address, user number, and a password. As with other forms of electronic banking, you must never disclose your password to anyone.

Beware of "phishing" - bogus emails or calls claiming there is a problem with your account and asking for your confidential details. No legitimate bank or retailer will ever ask you for these details by email or telephone.

Avoid doing financial transactions on public machines in libraries or internet cafes.

Other Services

Automatic Payments

You can arrange with the bank to make a regular automatic payment for a fixed amount from one account to another. This is good for paying rent, loans or regular bills. There will be a transaction fee as well as fees associated with setting up, changing or stopping an automatic payment.

Direct Debits

You can arrange for other businesses, with your prior consent, to regularly deduct money from your account to pay for a certain service. The amounts can be fixed or variable. If variable, the business taking out the funds must let you know how much they will be debiting from your account at least 10 days before the payment date.

Direct credits

A useful way of receiving regular payments directly into your bank account. In addition to NZ Superannuation payments, these might also include investment income from dividends or interest. The costs of setting this up are usually paid for by the person or organisation making the payment.

Credit Cards

Credit cards can be useful to make purchases, get emergency funds and as a form of identification. If you pay off the balance at the end of each month, they can save you money. However if you can’t pay off the monthly balance, credit cards are very expensive as the interest rates are high (+20% pa).

If you suspect you're going to be carrying a monthly debit balance, it can be worth transferring to a "low-interest" (around 10% pa) credit card. However, lower interest will usually be balanced by higher fees and/or reduced free credit periods, so it's important to shop around.

Many banks offer 'debit cards' that look like a credit card but debit your account immediately. This can be good for people who want a card but don't want debt.

Overdraft

Overdraft facilities may be useful to smooth funds if you have a variable income. It may be cheaper to have an overdraft than to incur penalty charges.

Loan Facilities

Make sure you are clear about all the details. You need to know: how long it will take to pay back; how much and when you need to make repayments; how much the loan is costing you in total; and the rate of interest. Ask if there are penalties for early repayment.

Insurance

Many banks also sell insurance products but you do not have to purchase insurance from a bank providing the loan.

Customer Complaints

All banks adhere to the Code of Banking Practice and copies are available from your bank branch. The Code requires banks to have their own internal complaints procedure. If you have problems you should be able to approach the complaints officer. If you are not satisfied with the way your complaint has been handled you can seek the help of the Banking Ombudsman, at no cost to yourself.

Contact the Office of the Banking Ombudsman by calling
Freephone 0800 805 950 or write to:
The Banking Ombudsman
Level 11, 109-111 Featherston Street
P O Box 10-573 Wellington
E-mail help@bankombudsman.org.nz

For more information about banking go to: The Consumers Institute