the mozo blog

Financial markets are in turmoil again. We’re all being told not to panic, but putting the blinkers on and proceeding as normal is also a mistake. Here are seven steps entrepreneurs can take right now to profit from the downturn, not get crunched by it.

1. Be alert for new opportunities. As Richard Branson famously said, “Fortunes are made out of recessions”. Savvy entrepreneurs can take advantage of the lower barriers to entry and new market opportunities created by a downturn, with consumers and businesses all looking for the next big thing to help them cut costs and make money.
2. Don’t take big financial risks. Now is not the time to undertake capital-intensive projects or plough truckloads of cash into the launch of a new business. Re-evaluate any projects that require big ticket spending and find ways to scale back your plans and reduce costs without killing off the project altogether.
3. Adapt your marketing to the times. Put more focus on low cost, low risk marketing channels like PR, social marketing and search marketing and see if you can take advantage of struggling suppliers to negotiate ‘pay for performance’ contracts.  Downturns are also a great time to bargain for discounted advertising that you might not otherwise be able to afford.
4. Improve your cashflow before its too late. Consider offering an early payment discount or reward scheme to ensure you get paid as quickly as possible. If it’s been a while since you’ve run credit checks on your main customers, now is the time to run those checks again to make sure nothing’s changed.
5. Clamp down on day-to-day business expenses. Question all expenditure personally and set aside a few hours to shop around and see if you can get a better deal on your business banking, phone, Internet and utilities services.
6. Consider locking any excess business cash into a fixed rate term deposit. Experts are tipping a rate cut of up to 50 basis points in September, and some business term deposit rates are already falling, so if you’ve got spare cash sitting around act fast before rates fall any further.
7. Have an action plan to get your business back into warp gear as soon as conditions return to normal. Those that move the fastest will get the jump on their competitors and have the opportunity to make real headway while others flounder around with the blinkers on.

Do you have any tips of your own? Share your thoughts on our money Q&A forum, Mozo Answers.

As blogged about last week, when we were collecting the data to power our new business banking comparison service, we were surprised to discover that small businesses were being treated as second class savers by many banks, receiving on average 0.56% lower interest rates than personal savings account customers.

We could see no justification for this levy on business savers. Are the banks earning any less interest on business savings? We contacted several banking providers to get answers, here’s what they had to say:

NAB
Personal Savings Account: iSaver
Introductory Interest Rate: 5.75%
Ongoing Interest Rate: 4.75%

Business Savings Account: Business Cash Maximiser
Introductory Interest Rate: n/a
Ongoing Interest Rate: 0% for balances under $10K, 4.75% for balances over $10K

Difference: Intro rate: 1.00%, Ongoing rate: up to 4.75% depending on account balance

Response: The needs of business and personal customers are different. Business customers who are looking to earn interest on their cash generally look at a term deposit or more sophisticated investment vehicles. In contrast personal customers use deposit accounts more as a traditional savings account, and are therefore more focused on interest rates.

Sharna Rhys-Jones – Group Media Adviser

RABODIRECT
Personal Savings Account: High Interest Savings
Introductory Interest Rate: 6.50%
Ongoing Interest Rate: 6%

Business Savings Account: Business High Interest Savings
Introductory Interest Rate: 5.60%
Ongoing Interest Rate: 5.10%

Difference: Intro rate: 0.90%, Ongoing rate: 0.90%,

Response: Business money by its nature isn’t as sticky as personal clients so it’s priced accordingly. Due to SME’s cashflow requirements there tends to be more inflows and outflows so banks cannot rely on having long term access to the funds compared to personal clients. Therefore we price SME accounts at lower rates.

Greg McAweeney – CEO

BANKWEST
Personal Savings Account: Telenet Saver
Introductory Interest Rate: 6.15%
Ongoing Interest Rate: 5.25%

Business Savings Account: Business Telenet Saver
Introductory Interest Rate: n/a
Ongoing Interest Rate: 5.20%

Difference: Intro rate: 0.95%, Ongoing rate: 0.05%

Response: Business customers prefer other value adds over a bonus rate, such as access to a business banking specialist should they need it. Access to a business banking specialist is offered regardless of whether you have a single business savings account or a whole business package.

Tatiana Day – National Media Manager

What’s even more interesting is that not all banks treat business savers as second-class customers. And the ones that play fair say they can’t see any justification for the ones that don’t. Here’s what they have to say on the matter:

ING DIRECT
Personal Savings Account: Savings Maximiser
Introductory interest rate: 6.35% for four months
Ongoing Interest Rate: 5.0%

Business Savings Account: Business Optimiser
Introductory interest rate: 6.25% for six months
Ongoing Interest Rate: 5.0%

Difference: Intro rate: 0.10% but the longer intro period evens things out, Ongoing rate: 0%

Response: We want to offer consistent long-term value and fair pricing to all our customers. We don’t think tiered accounts are fair. Most of our business customers are SMEs looking for a simple, easy to manage online account with great rates. Businesses shouldn’t be penalised for the size of their business.

John Arnott – Director of Products

ME BANK
Personal Savings Account: Online Savings Account
Introductory Interest Rate: n/a
Ongoing Interest Rate: 5.60%

Business Savings Account: Business Investment Account
Introductory Interest Rate: n/a
Ongoing Interest Rate: 5.60%

Difference: None

Response: There is no justification for offering lower rates to business customers. All ME Bank customers receive the same fair deal whether they are individuals or businesses. Simplicity, transparency and fairness are our core principles. We don’t offer short term introductory rates, tiers, or have hidden fees and we calculate interest on every dollar, every day.

Ian Hendey, Group Executive Brand, Product and Distribution

**

What do you think? Do businesses want value adds over great rates or do they just want a fairer deal? Have your say here on tell us what you think on Mozo Answers

It may surprise you to learn that all Australian savers are not born equal. That a veritable savings apartheid is being blithely practised by almost every bank in the country — and we’re virtually none the wiser.

Well, not any more.

When it comes to the interest rates and conditions offered on savings, there are two classes of client: personal and business. Personal savings accounts get the aristocratic treatment of high interest rates, no conditions, and bonus rates to sweeten the deal. Astonishingly, businesses are very much second-class savers, treated to lower rates and what can only be described as punitive and senseless conditions.

You don’t believe us. Why would the banks discriminate in this way? It’s just money in their pockets, generating cushy risk-free profits. What difference does it make if the savings belong to a person or a couple of people running a business?

The interest-rate reality, however, is clear cut. The top standard rate for a personal savings account currently belongs to the Ubank USaver, at 6.01%. The top business savings accounts offer a standard rate of just 5.6% (AMP Business eASYSAVER account and ME Bank Business Investment Account). Over five years, with an initial balance of $5,000, the difference is $137. It’s not exactly obscene, but where’s the justification?

Bonus rates continue the trend, with the top personal offer standing at 6.51% (Ubank USaver again), and the top business rate at 6.25% (ING Direct Business Optimiser). It’s also worth noting the top personal bonus rate is ongoing (with monthly deposits of $200), while the top business bonus expires after just 6 months, crashing back to 5.0%.

Now, $137 isn’t going to break the business (nor, ahem, the bank), but the conditions attached to some business savers go even further. It seems many business savings accounts require a minimum balance before they pay out any interest. Commonwealth Bank’s Business Online Saver, for example, only pays out its 4.75% interest when the account balance is over $10,000. In our previous example, the difference over five years with an initial balance of $5,000 (against the Ubank personal account) is $1,748. Now that’s starting to hurt.

Then there are other delightful tricks, such as NAB’s Business Cash Maximiser Account, which not only restricts interest to balances over $10,000, it also offers a lower interest of 4.05% (down from 4.75%) if you want the government guarantee. Remember, that banking surety your corporate taxes are paying for?

Stay tuned for Mind your own business accounts II – what the banks had to say when we asked: Why are businesses being treated as second-class savers?

So normally the Mozo Blog keeps you up to date with great deals, bank tricks and savvy financial moves. But today we wanted to tell you about a newly awarded tool that could save you a bunch — ourselves!
Abandoning our usual modesty for a moment, our Health Check feature was named a finalist for ‘Best Online Tool’ in the SmartCompany Web Awards. (Of course, we always suspected that Mozo’s unique facility to instantly compare your home loan or credit card with the rest of the market was pretty special.)

It confirms our place as Australia’s best website to help you through the money maze, saving you on fees and interest, as well as time.

So if you’re credit card or home loan is looking a little sick, give it an (awarded) Health Check! Let us crunch the numbers to see who’s the best performer for your personal financial situation.

See what all the hypes about: Health Check Your Credit Card, Health Check Your Home Loan, Health Check Your Personal Loan, Healh Check Your Car Loan.

When it comes to the game of banking, it’s hard for consumers to change the rules. But our days of getting screwed by needless fees may well be numbered, as NAB has announced it would scrap monthly account service fees on many of its accounts — at an annual cost of $110 million.

Naturally, we looked around for a catch: a minimum monthly deposit or sneaky disclaimer, but the move came out squeaky clean. NAB’s Classic Banking and eBanking personal transaction accounts are among those to change over on January 22.

NAB will also abolish over-limit fees and dramatically reduce its late payment fees — taking the sting out of financial forgetfulness (and haven’t we all been there).

The announcement comes after NAB upped the ante earlier in the year by ditching its overdrawn fee. Commonwealth Bank was quick to follow suit, but ANZ is dragging its heels and Westpac has gone AWOL on this one.

NAB hopes to make up the lost revenue in new customers, so the rest of the Big Four better check their game-plan. Because pain-free banking sounds like a winner.

Compare bank accounts at mozo.com.au

The Reserve Bank might have taken the axe to interest rates over the last six months, but savers needn’t despair quite yet.

Savings rates are still extremely competitive. New players like AMP and ANZ’s SmartyPig have recently launched high interest accounts, while challenger brands like RaboPlus and ING DIRECT continue to keep the banks on their toes.

Now that interest rates are settling down after a flurry of cuts, it’s a great time for savers to check their current rate against the best on the market to ensure they are still getting a good deal.

With this in mind, the team at Mozo has put together our Top 5 Tips for comparing savings accounts.

1. Promo rate tricks

Be wary of promotional savings rates that are only available for a limited time. Some savings accounts advertise headline rates of up to 4.5%, but after the first three or four months these rates drop right down, often to less than 3.0%.

Unless you are the sort of person who actively moves their savings every three months, or you only want a short-term savings product, you will be better off with an account that has a competitive ongoing rate. The RaboPlus savings account offers 4.0% on call with no nasty small print.

2. Provider track record

Look at the financial institution’s track record on savings rates. Is the advertised rate just a good rate today, or is the institution known for offering consistently competitive rates?

Mozo recently analysed the interest rates track record of the major savings providers and found that over the last six months, 8 out of 17 institutions have cut savings rates by more than the Reserve Bank. By contrast, RaboPlus and ING Direct have absorbed a significant percentage of the base rate cuts to maintain consistently competitive high interest savings accounts.

3. Interest rate conditions

Understand the conditions attached to an advertised interest rate, such as whether you need to maintain a minimum account balance or deposit a certain amount each month.

For instance the BankWest Regular Saver account offers a market-leading rate of 5.0% but you need to deposit between $50 and $500 per month, and make no withdrawals, or you’ll earn 0% instead.

If you’re not 100% sure that you’ll be able to meet these sorts of account conditions each month, go for a savings account without hurdles instead. The Members Equity Bank Online Savings Account has a competitive 4.0% interest rate with no strings attached.

4. Linked accounts

Check whether the institution requires you to open a linked bank account along with the savings account.

This is an increasingly common condition attached to high interest savings accounts. In addition to the hassle of having to open a separate account to access your savings, you may also get hit with additional bank fees.

The alternative is a new breed of accounts like the AMP First account, which offer high interest and everyday transaction access all in the one account. The AMP First account gives you easy access to your money via ATM, EFTPOS, online and cheque, plus a competitive 4.35% on your savings.

5. Accessing your cash

Work out what sort of access you need to your cash. If you’re happy to leave it under lock and key for a period of time, consider term deposits as an alternative to savings accounts.

Term deposits protect you from further drops in interest rates and exist for terms of anywhere from 30 days to 3 years. Right now UBank is offering 4.51% on 90 day term deposits and Macquarie Bank has 2 year term deposits at 4.5%.

Compare savings accounts now

The new Westpac Ignite Credit Card launches today, replacing the much loved Virgin Credit Card held by over 750,000 Australians.

Westpac is promoting the Ignite Credit Card as everything the Virgin card is, and more. But will the new Westpac card really ‘ignite’ the imaginations of all those ex-Virginites?

And if you’re an ex-Virgin customer, should you stick with the Ignite Credit Card or look around for a better deal?

You can see how Ignite stacks up against the rest of the market with our quick Compare Credit Cards tool. Just select Westpac as your lender and Ignite as your card.

Or read on for the Mozo low down on whether Ignite is a dud or a deal.

Westpac Ignite Credit Card Pros:

• Still promises no annual fee… ever (great to see they’ve kept this promise)
• Still has a low interest rate of 12.99% (but beware the cash advance rate is 17.74%)
• Still up to 55 interest free days on purchases
• Added chip security to protect your card against fraud
• No changes to your credit card number or payment method

Westpac Ignite Credit Card Cons:

• No more funky card colours: just one boring red card design. We can’t help thinking they’ve missed a trick here – how many cardholders would have stayed with Westpac just to keep their purple, pink or black plastic?
• No more funky Virgin brand: the cheeky cut off corner is gone and the Ignite Credit Card looks pretty much the same as any other card. Solid. Respectable. Not exactly the sort of brand that will appeal to many Virgin customers.
• No more Mates Rates rewards: Westpac has promised it’s own ‘Instant Offers’ program but details are sketchy.

The good news is that if you’re after a combo of low rate, no annual fee and interest free days, the Westpac Ignite Credit Card is definitely one of the best deals around. But you can do better with the mecu Visa credit card which offers a purchase rate of 11.99%, no annual fee and 55 interest free days.

If you’re paying interest on your credit card balance, then you’re likely better off switching to a card with a lower interest rate and a low annual fee. The BankWest Lite card offers 0% on balance transfers for 8 months and a low ongoing rate of 10.99%, with a $59 annual fee. This card also has an ‘Instant Discounts’ rewards scheme.

Alternatively the Aussie MasterCard offers a 12 month introductory rate of 9.99% on purchases and 5.99% on balance transfers. The ongoing interest rate is 11.74% and the annual fee is a respectable $49.

And finally, if you’re all about great looks over cost, then check out the NAB Low Rate Visa in silver or pink and the cute little NAB Visa Mini in a choice of 5 colours.

Compare credit cards now with Mozo.