Home Loans:

The only lender that didn’t pass on the full 25 basis point RBA rate cut in December was RAMS which only passed on a 20 basis point reduction. RAMS has been busy repositioning itself as a full financial services provider with the launch of new deposit accounts late in 2011 (see the Savings Account section of this article for more).

UBank (the online subsidiary of NAB) currently offers the best variable home loan rate as its usual requirement of having the loan for 3 years to receive a loyalty discount of 0.20% continues to be waived. We’re not sure how long this will last, but applicants currently get the discount for the life of the loan with no waiting period meaning the variable rate is just 6.14%, compared with an average standard variable rate across the market of 6.94%. The offer is a little restricted though as their loans are only available to people refinancing and not new loans.

Fixed home loan rates stopped falling in December unlike previous months when we had seen quite large movements. The average 1 and 3 year fixed rate were down about 10 basis points, and there was virtually no movement in fixed rates from the major banks.

Personal Loans:

Despite the two rate cuts late last year there has been little benefit passed on to personal loan customers. The average secured variable rate loan has only moved down 11 basis points over the past year, and unsecured variable rates have actually gone up! The best rates are offered by credit unions, whether looking at secured or unsecured.

Credit Cards:

As for personal loans, credit card customers have every right to feel they are getting a raw deal. The average credit card rates barely moved in December and even over the longer term are fairly static. Last month this blog singled out QANTAS Staff Credit Union for an honourable mention, having passed on November’s rate cut to their credit card customers, and they’ve done it again in December. Its Lifestyle Rewarder is one of the cheapest credit cards with rewards on the market, now at 13.49%.

Savings Accounts:

The heat has certainly come out of the savings account market with the average rate down 39 basis points in December alone, although some of this decrease may have been due to delays in passing on the November rate cut.

The best introductory rate accounts are currently offered by RAMS (6.12% but only to RAMS home loan customers) and UBank (6.11%). Interestingly these are both owned by major banks – Westpac and NAB respectively – so it seems there is real competition between the majors, but through their alternate brands more than their own. ANZ is taking a different approach, offering the third best rate in the market of 6.00%, but through its own brand rather than its online Smartypig brand.

Term Deposits:

There are still some great term deposit rates to be found as they haven’t been falling as fast as either at-call deposits or home loans. If the RBA continues its downward movement of the cash rate over the next few months now might be a good time to pull some money out of at-call accounts and have some assurance of your interest rate.

The best 6 month rates at the time of writing were UBank’s 6.11% and ING Direct’s 6.00% while the best 1 year deposit rate is 5.50% offered by Police Credit Victoria and Credit UnionSA, and a range of others close behind. Check out our Term Deposit selector tool to find the best rates for the term that you’re interested in.

Although the RBA has a month off from meeting to review the cash rate in January the Mozo RateChasers will be keeping a keen watch to see if the banks are going to do the right thing and pass on the same reductions to credit card and personal loan customers as the have for those with home loans.

Team Mozo has poured over five different gold credit card insurance terms and conditions (not an easy task), to give you all the info you need to know about gold credit card travel insurance.

Below are the gold credit cards we looked at:

St George Gold Low Rate credit card
NAB Gold credit card
Commonwealth Gold Low Rate credit card
Bankwest Breeze Gold credit card
AMEX Gold credit card

Who’s covered

Bring your family! In all five gold credit cards the card holder, spouse and dependent children are covered. However, there are certain eligibility requirements to keep in mind.

Eligibility

All the gold credit cards we took a look at require some of the travel expenses (travel ticket, accommodation or itinerary items) to be paid on the gold credit card. Keep in mind there is also a minimum amount to be paid on the credit card per person travelling to ensure they’re covered.

The AMEX Gold credit card and the St George Low Rate credit card both require you to purchase each persons return overseas travel tickets on your gold credit card prior to leaving Australia.

Not all credit card travel insurance is linked to airfares! The NAB Gold credit card allows you to pay a minimum of $500 per person in general prepaid travel expenses, accommodation cost or land tour costs to be eligible for coverage.

You can also pay for accommodation on the Commonwealth Bank Gold to meet the eligibility requirements. It’s a bit pricey though! A minimum of $950 has to be spent on each return travel ticket or other expenses (accommodation, itinerary items). If you choose to go with the airfare only option they do have an alternative clause, where you can pay 90% of each persons return overseas ticket to be covered.

Stand-out:

The lowest eligibility requirement is the Bankwest Breeze Gold credit card, as only 75% of your return travel ticket has to be paid on the credit card for insurance.

Excess
Paying excess usually can’t be avoided if you need to make a claim! St George Gold Low Rate, NAB Gold and Bankwest Breeze Gold all have a general excess of $200. However, with each gold credit card there are some items that are exempt.

The St George Gold Low Rate and the Bankwest Breeze Gold credit cards both have no excess for loss or damage to personal property (travel documents, credit cards, emergency replacement of clothes and toiletries).

NAB has quite a few items that are excluded from excesses: travel delays, resumption of overseas journey, return of rental vehicle if you are unwell, baggage and personal items, fragile items, and wear and tear from atmosphere or climatic conditions. Phew!

On the other hand, the Commonwealth Gold Low Rate has a general excess of $250 for things like medical and like the other gold credit cards there is no excess for damage to personal items. There are smaller excesses of $150 for unexpected cancellation of travel arrangements and other unexpected expenses, resumption of journey and special events.

AMEX Gold has specific excesses according to what is to be covered. Medical cover has an excess of $500, baggage and personal $100 and your laptop $250.

Expiry Date
St George Gold Low Rate, Commonwealth Gold Low Rate, Bankwest Breeze Gold and AMEX Gold all have a 3 month expiry date. This means that if you’re planning to travel for more than three months consequently you may have to purchase stand-alone travel insurance because the majority of gold credit card travel insurances cannot be extended.

Stand-out:

The only gold credit card out of the five to have more than 3 months cover is NAB Gold, with an expiry date of 6 months. That can make quite a difference if you’re going on a world cruise!

Medical
Medical insurance is one of the most important covers, especially in countries like the US where medical insurance is a must. Thankfully, there is unlimited medical cover on the St George, Commonwealth and Bankwest Breeze gold credit cards and NAB Gold covers actual incurred costs.

All the gold credit cards state that they will not cover pre-existing medical conditions, such as asthma or diabetes. And remember the devil’s in the detail! There are several terms and conditions to watch out for in regards to medical insurance. Many credit cards will not provide medical coverage for special sports or extreme sports, so if you’re thinking of going skiing and conquering the black slopes, be sure to check your coverage!

The Amex Gold has a $2.5 million limit on medical cover. We know this might sound like a huge amount, but if other gold credit cards are offering unlimited cover, it doesn’t quite stack up. Especially if you have a freak accident, that requires expensive medical procedures. You might be a bit huffed if the $2.5 million doesn’t cover the costs!

Baggage and Property
St George Gold Low Rate and Bankwest Breeze have the same cover for baggage and property, such as $10,000 per person and $15,000 for the family. The Commonwealth Gold Low Rate has slightly higher cover for a family with $20,000 but still capped at $10,000 per person. The NAB Gold has the highest cover for an individual with $15,000 per person and $20,000 for a family.

Stand-out:

AMEX Gold has the same cap of $10,000 in total overall per person. But the great thing is that there isn’t a family limit. So if you’re travelling with your partner and two children as a family you’ll be covered for $40,000.

While travel insurance differs between gold credit cards, all in all most coverage stacks up well and if you find the right one for you and your trip, there’s certainly some gold to be found! Stay tuned for our next blog when we put platinum credit card travel insurance to the test!

Home Loans:

Most lenders have now moved their variable rates following the Reserve Bank’s reduction in the cash rate early in the month. The only bank not to cut its variable rates by the full 25 basis points was NAB who, although still having the lowest standard variable rate of the big 4 banks (now 7.47%), only took 20 basis points off its rates. Perhaps to balance this NAB’s online subsidiary UBank has jumped in with one of the lowest variable rates around at 6.39% with its UHome Loan. Usually borrowers would have to pay 0.20% more than this for the first 3 years before qualifying for the ‘loyalty’ discount, but UBank is now offering this discounted rate to its first 1,000 successful applications.

Fixed rates continued to fall during the month with quite a few 1, 2 and 3 year options at around 6.0%. Better Option offered the best 1 year rate at 5.84% and the best 3 year rate at 5.89%, while Greater Building Society had the sharpest 2 year rate at 5.94%.

Personal Loans:

Unlike home loans, many personal loan rates have not yet benefitted from the Reserve Bank rate cut as evidenced by the average secured variable rate only coming down 8 basis points during November to 10.79%. The main area for competition in personal loans has been the fixed rates on secured loans where a number of lenders have passed on the full rate cut. Over the month we saw the average rate fall from 10.88% to 10.74%, with a range of offers coming in under 9%.

Credit Cards:

This is the product group that has benefited least from rate adjustments and during November the average rates barely moved. For credit cards with rewards the average rate went from 19.54% to 19.52%, and for cards without rewards the average rate went from 15.06% to 15.03%.

Qantas Staff Credit Union customers with its Lifestyle credit card have a reason to smile – its already low purchase rate of 13.99% was reduced to 13.74%, one of the few credit cards with a rewards program to feel the full effects of the lower cash rate.

Of the big banks, the only change we saw was ANZ cutting the rate on its Low Rate card by the full 25 basis points to 13.24%, although the rates on all of its other cards have not been adjusted.

Savings Accounts:

Unlike personal loans and credit cards, there’s been no hesitation in passing the rate cut on to savings account customers. During November the average rate fell by a neat 25 basis points, but this hasn’t been uniform across all products.

The market leaders for introductory rates for online savings accounts, UBank and Virgin Money cut their rates by 40 and 39 basis points respectively, leaving Virgin Saver on 6.12% and USaver on 6.11%. Both of these accounts are now beaten by HSBC’s Serious Saver on 6.20%, but as with all high introductory offers it pays to check what rates are paid beyond the introductory period.

Term Deposits:

As markets are anticipating more rate cuts and competition for deposits is easing, term deposit rates are continuing to move down.  Only small premiums are being paid for locking your money away for longer terms at the moment, making shorter terms seem the best value.

Over the last year the average rate for 6 month deposits has only fallen 9 basis points, however the average 1 year rate is down 71 basis points and the average 3 year rate has fallen 85 basis points.

For deposits of $10,000, the average 1 year rate is 5.22% but the best rate in November was QANTAS Staff Credit Union’s 5.70%.  For 3 year deposits the average rate is 5.34% and the best rate was 6.00% from Bank of Cyprus. Bank of Cyprus also payed 6.00% for 6 months.

The Mozo Rate Chasers will be keeping a close eye on whether the banks eventually pass the rate cut on to their credit card customers, and who benefits (and who misses out) if there’s another cut when the RBA meets on December 6. Whatever happens in the world of rates, we’ll have all the latest here.

Personal Loans: Over the last year, variable rates for personal loans have crept up with the average secured personal loan rate now 6 basis points higher, and unsecured rates a whole 39 basis points higher, perhaps reflecting an increased premium for risk. Greater Building Society sharpened its rates across all personal loans, reducing their unsecured fixed rate from 13.15% to 12.99% and now offering 8.99% for fixed new car loans.

Credit Cards: Credit card rates have been quiet recently with the only point of particular interest being Commonwealth Bank launching its Diamond Awards Credit Card. Diamond Awards has an annual fee of $425 and an interest rate of 20.74% for purchases, but you can earn up to 3 points per dollar when using the American Express card, and has a high points cap of 1 million per year.

Term Deposits: Anticipating the November RBA rate cut, term deposit rates moved sharply down. Looking over the last year paints a stark picture. While the cash rate rose 0.25% between October 2011 and a year earlier, average term deposit rates were down 0.53% for 1 year investments, 0.84% for 3 years, and 0.70% for five year terms.

Savings Accounts: In contrast to term deposits, at call deposit rates have been increasingly generous. As competition intensified the average rate went from 4.94% to 5.37% over the last year, an increase of 43 basis points compared with the cash rate’s increase of 25 basis points over the same period. Early indications are that this may not last with one of the main players, UBank, cutting its USaver bonus rate from 6.51% to 6.11% following the November 2011 cash rate cut.

Check back next month as we bring you highlights of the fallout from the latest Reserve Bank cash rate cut!

But where should you stash your hard-earned cash in this tumultuous economic climate?

Is superannuation a con?

Many people are starting to wonder. Nothing can really protect people from the uncertainty of the stockmarket in relation to superannuation. Unfortunately, unless you are one of the really lucky few who are reaping the benefits in retirement from a (now unavailable) superannuation scheme that is indexed against the CPI on DEFINED BENEFITS, you will join the majority of us punters on the “Super Roller Coaster”!

The tax benefits, whilst substantial if you are prepared to stick it out for decades, may not offset the severe losses experienced by many in a undulating market which has set some people back to the same level they were on five years ago!

If you do the math and invested $200,000 in a term deposit five years ago at the, then, available 8% you would be $80,000 better off even when you deduct tax. Whilst the gains MAY be made over 30+ years, the share market (forming the base of superannuation investment) is a gamble. Of course, one must NEVER change their options or attempt to withdraw Super when it is at its lowest as it will compound your losses severely. However, I really do believe that Super is over-hyped and under-performing.

The REAL danger with Super is that it is also subject to ongoing political interference. Don’t be surprised if, in the near future, the federal government will prevent anyone from taking LUMP SUMS and change the laws so that everyone will need to eke out a pension. As huge numbers of Baby Boomers are retiring, the federal government will be prodding and poking away at the methods of superannuation payments to ensure they will not have the burden of paying out massive lump sums over time.

Personally, I believe that it is preferable to invest in an investment property over time which, at least, will provide you with a steady rental income. Alternatively, take the lump sum as soon as you hit 60 (or 65) and put it in a Term Deposit. The HIGHS may not be as good as the occasional uplift in Super, but you can sit on the money (without worry) and sleep at night knowing exactly how much you are going to get each month.

That means a lot when you’re retired – who needs the stress?

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

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?

When it comes to savings accounts, there are two things that matter – rate and monthly fee. Commonwealth’s Goal Saver has managed to deliver on both fronts. For starters, there is no monthly service fee on the account. As for the interest rate, it’s an ongoing 6.0% – as long as you increase your balance by $200 a month and make no more than one withdrawal a month. Failure to meet the requirements and the rate drops down to a measly 3.0%.

The real headline here is the special rate conditions. Where before the market was focused on a ‘honeymoon rate’ that stayed high for the first few months then receded back to a lesser standard rate, over the past few months we’ve seen a trend emerging in favour of high ongoing rates with regular conditions. BankWest’s Regular Saver is currently at the head of the market with a rate of 7.0% as long as you make no withdrawals and deposit between $50 and $500 a month and UBank’s USaver offers 6.51% as long as you deposit $200 a month.

Whilst the Goal Saver rate does not quite hit the heights of BankWest and UBank, it certainly is a very good effort from a Big 4 bank and definitely warrants some consideration, particularly if you’re an existing Commonwealth customer who likes the convenience of all your banking in one place. As for the competition, the Goal Saver’s combination of rate and flexibility has really given Commonwealth the march on their rivals. Neither NAB or Westpac offer an ongoing rate anywhere near the 6% mark and whilst ANZ’s rewards saver does, it doesn’t have the flexibility of allowing any withdrawals.

It’s good to see banks starting to shift the goalposts towards rewarding their existing client base for an ongoing period as opposed to continuously luring new clients in with flashy headline rates then forgetting about them after four months. For so long banking advertisements have featured pledges to put the customer first only for the exact opposite to occur in practice. Perhaps this new offering from Commonwealth heralds the start of all that changing. And who knows? When all’s said and done, it might even stop me taking so long to notice those ads at the bus stop.

Got any more questions on savings accounts? Ask away on Mozo Answers!