Banking

Getting smart about your banking can be very good for your financial future.  By cutting your way through the jargon and huge selection of accounts available you can slash the amount you pay in fees and earn better interest.

By being smart, you can be hundreds of dollars a year better off.

• Know your options
• Find the best interest rate
• Check the fees and charges
• Follow our 8 rules of banking

Know your options

There are two main types of bank accounts. Current accounts for everyday banking, and savings accounts that pay interest.

Banks have lots of different names for their accounts, which can be confusing.  To get the best deal it's important to compare them. Don't choose on fees or interest rates alone.

If you have a mortgage with your bank or substantial term deposits you will probably qualify for fee-free banking. If not, you can either choose an account where you can avoid the highest fees (such as by not having a cheque book, banking electronically and cancelling your paper statements) or you can have an all-in-one monthly fee, which will often be around $10 or $12. Fees can also be minimised by avoiding branch visits.

Try to do as much of your banking as you can using automatic teller machines, EFTPOS, telephone banking and internet banking. You'll spend less than if you're reliant on going into a bank branch.

But beware even online banking has charges – such as for setting up payees online.  So make sure you always check out the costs before banking by electronic means.

If you do have more cash in your current account than you need – then transfer it to a high-interest savings account. Some of these accounts pay up to 7% or 8% more than current accounts. Usually these accounts are online only and you can only transfer money to and from your current account.

Regular savings into high-interest savings accounts can soon mount up into a sum worth investing.

Remember, you're not just limited to banking with the main banks. Credit unions, and mutual organisations such as building societies offer most of the services the big banks do and may have a better deal. 

Find the best interest rate

Interest on your savings can add up fast. So don't miss out by sticking with the same old account you've always had. It's easy to check interest rates online.

If you move money to higher-interest accounts regularly and leave the bare minimum in your current account your savings will mount up quickly. But don't risk being hit with honour or dishonour fees that are charged when you spend beyond your limits because these can wipe out your savings gains. 

Check the fees and charges

The interest rate isn't the only reason to choose an account.  Fees can eat up all of the interest you earn and more. It's a good idea to check regularly how much your bank charges in fees.

It's possible to pay no fees at all if you're smart about your banking. That includes avoiding honour and dishonour fees. 

It's worth visiting your bank from time to time and asking if you could save money by switching accounts. There may be a new account available or one that fits your usage patterns better. You may find, for example, that by getting rid of your cheque book, stopping your statements, and paying all your bills online that you pay no fees at all at some banks.  

8 rules of banking

1. Work out how much you're paying in fees every month and ask your bank if there's a more suitable account for you.
2. If you qualify for a student or graduate account, or you are over 65 or receive NZ Super, you could save money on fees. Some banks also offer special packages to groups such as government employees.
3. You're not married to your bank. If you see a better deal elsewhere, then consider changing. The new bank will often help you switch.
4. Try to keep minimum balances in low-interest accounts such as current or cheque accounts and keep the bulk of any short-term savings you have in a high interest account.
5. Keep track of your APs and direct debits so that you don't spend beyond your limit. Even better, keep your bills and spending accounts separate and have a regular amount transferred automatically from one to the other.
6. You can have your current account with one bank and high-interest saver with another. It's usually easy to transfer money from one to the other.
7. Keep good records of your balances to avoid accidental overdrafts. If you're charged a large fee or one you think is unfair, then talk to your bank and ask them to reverse it - even if you've exceeded your limit, many staff members have the authority to remove charges.
8. Always memorise your PINs and never write them down or give your cards to someone else to withdraw money. It's also worth looking over your shoulder at money machines to make sure no-one's watching you.