the mozo blog

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

If you haven’t heard, apparently banking’s ‘Big 4’ is now the ‘Big 3’. Through a carefully planned and executed integrated campaign rooted in social media, NAB have decided to ‘break-up’ with ‘former’ cohorts Commonwealth, Westpac and ANZ.

On face value, it seems like a smart decision from NAB. Attempting to shed the image shared by the ‘Big Four’ could only help it’s stuttering financial performance and doing so by shedding fees and lowering rates is also a great step. However, could this move backfire in the long term?

By breaking up with their illustrious rivals, NAB’s losing its one key positive attributes – being better than the rest of the Big Four. Amongst their former brethren, over the past 18 months NAB had managed to position itself as the cheaper alternative with lower rates and less fees. Now having ‘broken up’, it opens them up to greater comparison with challenger brands, the likes of ING Direct, Aussie and RaboDirect, who have been doing this for a long time anyway. And this comparison isn’t pretty reading, particularly when looking along at the home loan battleground where the bulk of this banking war is being fought.

For example, NAB may have the lowest rate standard variable home loan out of the Big Four, but compare it to the rest of the market and they rank a lowly 36th out of the 58 different providers’ standard variable loans we have on our site. If you go on to take upfront and ongoing fees into account by sorting by comparison rate, they sink even further, plunging to 43rd on our list – though still above Commonwealth, Westpac and ANZ I might add.

Which leads to the wider problem with NAB’s strategy. I applaud its moves to cut fees and interest costs and I enjoy the fact that it’s trying to reignite competition in the consumer banking marketplace. The problem is, if everyone starts surveying their options and voting with their feet, will NAB be the winner? Who says an irate Commonwealth Bank customer is going to land up on NAB’s door when they can go a bit further down the road and get an even cheaper home loan? Moreover, what’s to stop NAB’s customers doing the same? Mutuals and Non-bank lenders on average still have far lower rates and fees.

If everyone starts looking for the best deal, NAB’s got a battle it can’t win. Not yet anyway. Breaking up may be hard to do, but only time will tell if it was the right thing to do.

Compare home loans at Mozo.

Welcome to week 2 of the ‘Mozo Answers Question of the Week’. Our Answers forum has been bombarded by questions about deposits this week, mainly centering on what the best rates are for both savings and term deposit accounts as well as the respective benefits of choosing a term deposit over a savings account and vice versa.

Lets start with savings accounts, where there are a couple of standouts well worth looking at. First off, BankWest’s “Regular Saver” has no monthly fee and a market leading rate of 7.0%. It’s an amazing rate, however you can’t make any withdrawals and you can only deposit up to $500 a month. If you can’t stick to those parameters, UBank’s USaver is a great option. It’s got a fantastic interest rate of 6.51% as long as you set up an automatic savings plan of at least $200 a month, 6.01% if you don’t. There’s no monthly fee, you can withdraw and deposit as much as you like and there are no balance conditions either.

Turning our focus towards term deposits, as a result of some pretty fierce competition there are a lot of attractive rates out there at the moment. To get the best out of a term deposit you’re better off giving it some time – for example, to get a rate of 6.0% or over you’ll have to invest your money for a minimum of 6 months. Take a look at the table below to see some of the best rates out there on various terms:

Money lovers, bank spotters and finance paparazzi take note: Mozo is chuffed to present our inaugural People’s Choice Awards.

In the last year, an astonishing 23,938 reviews were cast by you, the real customers, raving about your bank stars and dumping on your money duds. Mozo then crunched the numbers and tallied up the scores, to give voice to the people’s choice.

So who are the home loan heros, the credit celebs and stellar tellars? A round of applause for your winners:

Australia’s Best Bank

ING Direct

Australia’s Best Credit Union

Victoria Teachers Credit Union

Australia’s Best Building Society

The Greater

Sill more coveted awards – including best category performances and runners up – can be ogled at the People’s Choice Awards webpage.

And interestingly, it’s the new talent – the challenger brands and independents – who won your hearts and accounts. More interestingly still (if this kind of thing hits your sweet spot), the people rejected splashy headline rates and flash-in-the-pan intro offers in favour of the best ongoing deals.

For example, UBank – winner of the Best Savings Accounts – doesn’t have the highest rate on the market for its USaver account. However, it does offer an astoundingly competitive ongoing interest rate if you make regular contributions, and is perhaps the best choice for longer-term savers.

So why not get in on a spot of celeb-watching and discover the ultimate line-up of financial products: the best credit cards, home loans, savings accounts, bank accounts, personal loans, term deposits as chosen by the people.

Check out the winners podium at The Mozo People’s Choice Awards 2010.

With high competition for customers on both the lending and savings/deposit fronts, it is often the everyday transaction account that gets forgotten by many providers and consumers. Viewed by many as a simple vanilla account, many Australians are oblivious to the fact that there are some great, innovative products out there, all geared to help them save money.

For example, both BankWest and ING Direct offer transaction accounts that reimburse ATM fees. A more innovative product is Suncorp Bank’s everyday options account, which is an everyday account that can link to multiple savings accounts as well as lock away part of your funds to a term deposit “flexiRate”.

St. George’s latest offering, St George SENSE Savings, is similar in many ways to Suncorp’s with a few different bells and whistles. The ‘SENSE’ account is effectively an amalgam of St. George’s leading savings and transactions accounts with a few clever gimmicks to help things along.

The first innovative add on is that you receive a combined statement for both accounts. SENSE also comes with a range of pretty snazzy and informative graphs that help you track your spending. One of them is a pie chart that breaks down your everyday spending by categories, such as leisure, home expenses, and transport. There’s also a bar graph version that shows these amounts month to month. Plus you get a graph outlining your savings progress in relation to your set target.

There’s also the Sense Rounding Contribution graph -and this is what really sets this product apart. What exactly is a rounding contribution? Well, every time you make a purchase on your debit card, the SENSE account automatically rounds up the transaction to the nearest dollar and takes that balance from your everyday account and puts it into your savings bucket. For example, say I bought a coffee and a croissant on my way in to work that costs me $5.30. If I pay using my SENSE account, $6 gets taken out of my account. $5.30 goes to the barista and the remaining $0.70 goes into my SENSE savings account. The same process also applies to all BPay transactions too. It’s a really nifty way to start saving without putting any effort in.

All the standard perks come too – if you deposit over $2000 a month into the account you don’t pay an annual fee, there’s no minimum balance required, a VISA debit card, and all the convenience of having linked accounts, such as ease of transfers and regular payments. The savings account comes with a reasonable 4.85% rate as well.

So hats off to St. George. They’ve managed to craft a simple, yet intuitive and innovative product that redefines the relationship between the transaction and the savings account. For all those that struggle with saving, or simply having to manage two accounts, this is one option that could make a lot of SENSE.

Find the best savings account rates at mozo.com.au.

ING Direct has just taken the wraps off its new “Orange Everyday” account.  ING Direct have been hinting for a while now that this transaction account would refund fees charged by ATMs when you withdraw your money.  Now the full details have been announced, and the bad news is that the much-anticipated ATM fee refund only applies if you withdraw $200 or more.  According to the latest RBA statistics, the average ATM withdrawal is about $180.  So in looking for the best transaction account, you really need to consider whether the way you use your account matches the conditions each bank has attached to their offering.  Are you happy to jump through their hoop?

If you always take out $200 cash or more, ING’s Orange Everyday account certainly is worth considering:

• ATM fee rebated from any ATM in Australia if you withdraw $200 or more.
• EFTPOS is free, and ING pays you 50c if you withdraw $200 or more as cash out via EFTPOS.  Yes, that’s right: they pay you to take cash out.
• $20 bonus paid on each of your first salary deposit, direct debit and Visa Debit purchase, if you do them before 2 November.
• Interest: none, but you can link to their savings account.

If you always deposit your salary to your transaction account, the BankWest Zero Transaction account may suit:

• ATM fee rebated from any Big 4 (or BankWest) ATM, regardless of the amount.
• EFTPOS is free.
• You must deposit $2000 a month or they’ll transfer you to a different account.
• Interest: none, but you can link to their savings account.

If you keep a few grand in your transaction account, or can’t be bothered transferring to and from a separate savings account, then you might prefer an account that pays some interest rather than worrying about the fees.  For example, the AMP First account pays 4.35% interest, charges $5 a month, and cash is free at nab ATMs, RediATMs and EFTPOS.

And of course if you’d just rather stick with using one bank’s own ATM, most offer an account with no transaction fees for about $4 a month.  Some of these pay a little interest, and some even waive the account fee in certain circumstances.

The move by ING Direct could encourage the major banks to look for new ways to offer fee-free banking, particularly if Brett Morgan, ING Direct’s Executive Director of savings gets his way. “We want to become the Australian consumer’s main bank, their favourite bank; they may bring their whole banking relationship to us”.  It will be interesting to see how many people are happy to do things the ING way.  And it will be interesting to see what other products come out in response, and what sort of conditions are attached.

Compare bank accounts with Mozo.com.au