With so many banks offering fee free accounts, debit card charges should be few and far between. But there’s a whole range of times when you could end up dealing with debit card fees – and less money in your account as a result.
Studies have shown that Australians pay billions of dollars for transaction accounts every year. In 2013 alone we paid $1.1 billion for our everyday debit card accounts.
According to consumer watchdog CHOICE, not paying attention to fees or shopping around for a good account is often what sets us back.
“Your average savings on monthly fees could be $60 per year,” CHOICE says on its website. The organisation goes on to warn about monthly account fees, ATM fees, international transaction fees and even a charge for just having a debit card. Then there are surcharges for different types of payments to consider.
On their own, any one of the above fees could seem like a small price to pay, but it is clear they can quickly add up. With so many accounts claiming to be fee free, and more and more people paying with cards, we really shouldn’t have to spend money to have a debit card.
This guide outlines five of the most common debit card fees people come across and outlines how to deal with them or avoid them altogether. By being more aware of these charges and when they are applied, you will be able to get the most out of having a debit card without being charged for it.
On This Page
- Monthly account fees
- Debit card fees
- Non-bank ATM transactions
- Debit card transaction surcharges
- International transaction fees
Monthly account fees
A number of fee free debit card accounts in Australia actually do have fees – they just waive them if a certain amount of money is deposited into the account each month, typically around $2000. So if you use your everyday debit card account for your salary, in most cases you will avoid these fees (assuming you earn a net income of $24,000 p.a.).
According to CHOICE, as of November 2014: “of the big four banks, only NAB offers an account with no monthly fee without conditions; ANZ, CBA and Westpac all require a minimum deposit.” The fees are listed below:
- ANZ Access Advantage: A $5 monthly fee, or up to $60 per year.
- Commonwealth Bank Smart Access: A $4 monthly fee, or up to $48 per year.
- Commonwealth Bank Complete Access: A $6 monthly fee, or up to $72 per year.
- Westpac Choice: A $5 monthly fee, or up to $60 per year.
In comparison, the NAB Classic has no monthly account fees and similar features. Other everyday debit card accounts that offer complete access include the ING Orange Everyday, Citibank Plus, UBank Ultra Transaction and Bank of Queensland Day2Day.
There is also a range of accounts that do not charge fees but may limit how many transactions you can do in a month. The ME Bank Interest ME Savings account, for example, offers 15 free EFTPOS transactions per month, but charges fees if you go over that, while CUA’s Everyday account only offers free withdrawals if the amount is greater than $50.
These types of account features and conditions really highlight just how much variation there is between “fee free” debit card options, so it is important to compare accounts and read the fine print. Otherwise you could end up with fees you didn’t even realise existed.
This charge is one that could surprise many people, but CHOICE has found that a lot of bank accounts actually do charge you for having a debit card. The organisation says it can cost “up to $5/month” for the convenience of a Visa or MasterCard debit card.
It is worth noting that these accounts usually come with a basic ATM card, such as those in the CIRRUS network. But ATM cards do not have the same security or features as a Visa or MasterCard option, which now includes CHIP-and-PIN security as well as contactless technology. ATM cards are also unable to be used for online transactions, which is why banks might also offer a debit card for a fee.
The Bendigo Bank Ultimate Everyday account, for example, gives you the option of a Bendigo Blue Debit MasterCard or an “Easy Money ATM card”, but charges $3 a month ($36 per year) for the “optional” debit MasterCard.
CHOICE recommends that you “check if there is a charge for having a debit card” before signing up for an account in order to make sure you are not slugged with extra fees for choosing or requesting a debit card.
If you withdraw money or check your balance at an ATM that’s outside of your bank’s network, you could end up paying anywhere from $1 to $4 for the service (or even more if you’re overseas).
The Australian Bankers Association fact sheet on foreign ATM transactions (pdf) explains: “Prior to March 2009, when a bank customer [did] a ‘foreign ATM transaction’, the customer paid a foreign ATM transaction fee. That fee covered a charge from the ATM owner, a charge from your financial institution or other card issuer for processing the transaction and other costs.” That fee was recorded on the customer’s monthly account statement.”
The ABA explains that this fee was charged by your bank and recorded on your monthly account statement, meaning you could end up with a lot of fees each month without any awareness of the cost when you withdrew money from an ATM.
“Direct charging lets you know upfront how much you will be charged by the ATM owner for making a foreign ATM transaction. You can then choose whether to use the ATM and pay the fee shown, or cancel the transaction at no charge and go to another ATM,” the ABA says.
But while the change back in 2009 means that we are now more aware of these fees, it has also led to an increased awareness of the cost of these charges.
A report from News Limited has found that Australians paid $627 million between July 2013 and July 2014 because of these charges. It also says that non-bank or foreign ATM transaction fees are now “the most hated finance fee”.
So how do you avoid them? The easiest way is to only withdraw money from ATMs within your bank’s network, or during EFTPOS transactions at merchants where no fee is charged for the service, such as Coles and Woolworths.
If you have a debit card account with a bank or credit union that only has a limited ATM network, it is also worth getting in touch with them to see whether they have “partner” ATMs that won’t charge a fee, or if they offer rebates to remote customers. Keeping these things in mind when you need cash will help you avoid fees that really shouldn’t eat into your account balance.
Debit card transaction surcharges
Both EFTPOS and online transactions can attract surcharges when you pay by debit card. The cost varies depending on the merchant, with some charging a percentage of the transaction and others charging a fixed rate.
ALDI, for example, has a 0.5% surcharge on credit card and contactless debit card transactions, which works out to be $0.50 per $100 spent. The supermarket says it charges this fee to cover the cost of accepting cards.
“Rather than ALDI inflating prices across the board to compensate for the credit card acceptance costs (like most of the retailers do) ALDI instead allows customers to make the choice as to the payment method they prefer,” it says.
“This allows customers who choose the lower cost method of payment, to receive the direct benefit by way of lower prices.”
Online bookings for airlines and cinemas, on the other hand, often add a “processing fee” or “booking fee” at a flat rate that could be as low as $1 or as high as $15. While not technically called a surcharge by these companies, consumer advocates such as CHOICE have pointed out that they typically only apply to card transactions. Then there are Cabcharge fees for taxis, which vary from state to state but could be up to 10% of the total transaction.
Avoiding these fees is often a challenge, particularly for online bookings, but all merchants legally have to offer several ways to pay, and at least one without a surcharge. A good rule of thumb is to check for charges before going ahead with a purchase and consider having other payment options on hand. That could mean cash when you’re shopping in person, or an online service like POLiPay when you’re shopping online.
Cards are a convenient and secure payment option widely accepted when you are travelling overseas, but paying with your everyday debit card often leads to an additional cost in the form of an “international transaction fee”. This charge is designed to cover the processing cost faced by your financial institution and is often between 2% and 3% of the total for each transaction.
That means, you could pay $2 to $3 for every $100 you spend in another currency while you are abroad, which quickly adds up (especially after you factor in currency conversion rates). Using cash or limiting the amount of transactions that you make on your card (ie by withdrawing money in large quantities or purchasing a lot of what you want at one time) are two common ways to limit international transaction fees so that they do not have as much of an impact on your account balance.
Another option is to choose an everyday credit or debit card that does not charge for international transactions – such as the Citibank Plus – or to use a multi-currency prepaid card like the Qantas Cash or Velocity Global Wallet. The latter are becoming more and more popular alternatives, allowing you to preload funds in whatever currency (or currencies) you will be using so that you get the convenience of a card, as well as the security of limited funds that are already converted to the right currency.
Debit cards are now an everyday part of life, but many of us pay more for them than we realise. Whether it’s fees for using a non-bank ATM, surcharges, international transaction fees or one of the other charges listed above, the chances are good you have paid for using your debit card in the past.
In many cases it actually doesn’t seem like that much money. A $2 fee for getting cash from an ATM, $7 for an airfare, whatever it is, on it’s own it might not feel like that much. But these charges collectively add up to billions of dollars every year. What’s more is they can often be avoided altogether.
So being aware of the different fees, the reasons they are charged and how to avoid them means that you can choose a debit card option that really suits your lifestyle. It also means you can make more informed decisions about how you use your card and how you spend your money so that you know you are getting the biggest bang for your buck as often as possible.