Here's how you can save tens of thousands of dollars at the bank
Monday, 2 September 2019
Are you throwing money away?
Almost all of us have some sort of relationship with a bank and pay significant amounts of money in fees and loan interest each year.
But there are a few simple ways that you can tweak the way you deal with your bank and save thousands of dollars in the process.
Shop around for a mortgage
Loyalty to a bank usually counts for nothing - you often get the best deals when you hustle.
**READ MORE:
* Which bank offers the best value for customers?
* Here's how to get rid of your credit card debt
* Credit card rule: Never pay the minimum**
If you have a home loan that's coming up for refixing, have a look at what else you could get in the market.
HSBC New Zealand has cut its fixed home loan rates, offering a flat rate of 3.35 per cent for terms between one and five years.
It doesn't have a big reach in this country but even the big four banks are all offering two-year special rates of 3.59 per cent.
If you were on a standard rate such as BNZ's 4.45 per cent and managed to qualify for a special rate at one of the other banks you could save about $200 a month on a $400,000 mortgage.
Sometimes you can get added incentives to shift, such as cash back, although it is becoming less common.
Whether it's worth breaking a fixed term to take a better deal elsewhere depends a bit on what's on offer. Usually, the fee you pay to break a loan is about equal to the interest you save.
Check your KiwiSaver fees
What you pay for your KiwiSaver account can vary a lot.
Schemes charge a fixed annual fee which can vary from nothing to about $60. They also charge a fee that is a percentage of your account balance.
When your balance is low, the fixed fee makes the most difference but over time the percentage becomes more important.
Sorted Smart Investor data shows fees range from 0.32 per cent a year to 2.39 per cent.
If you are under 18, or have a small balance, it's possible to avoid paying fees at all by switching to a provider such as Juno.
When you compare funds, look at the return offered after fees - this will help you understand whether you're getting value for your fees.
Assuming returns are the same, a KiwiSaver member in a high-fee fund could end up tens of thousands worse off at retirement than someone in a comparable low-fee fund.
Transfer your credit card balance
Carrying a balance on your credit card is a significant waste of money.
If you have $5000 of credit card debt and pay it off at $100 a month, you'll pay an extra $6818 of interest before you clear the debt in 2029.
You could save that money and get out of debt much faster by transferring to another bank.
Most banks offer an interest rate discount for people who move their credit card balances. How generous they are varies.
BNZ currently offers zero interest for a year on credit card balances transferred.
Moneyhub suggests picking a card with a small transfer fee and a long low-interest period to maximise the savings you can make.
'We recommend going for the longest low-interest rate period even if the transfer fee and/or annual fee is higher. Credit card interest is a killer, so locking in the balance interest-free for longer is going to save a lot. Most importantly, as the old card is now free of debt, we recommend lowering the credit limit so you can still use it but only for emergencies. It's pointless to clear the balance only to build up new credit card debt afterwards.'
If you've not paid off the balance by the time the low-interest period finishes, you can transfer again to another bank.
It's easiest to get a balance transfer deal if you have good credit.
Check your credit card deal
The range of credit cards has increased a lot in recent years.
Check the one you're using is right for you.
If you don't use it a lot you might benefit from a no-frills, low-fee card like ASB's Visa Light or Kiwibank's Zero Visa.
If you put most of your spending on the card, pay attention to the type of rewards you're being offered. You can choose from Airpoints, Hotpoints and cash back deals, among others.