Consumer groups are demanding the Commonwealth Bank and ANZ stop slugging low-income earners with unfair penalty fees on concession accounts.

Both banks charge penalty fees on the accounts, also known as basic bank accounts, the Australian Consumers Association (CHOICE) and Consumer Action say.

The accounts offer reduced-fee banking to recipients of government benefits, including pensioners and concession card holders.

The accounts attract penalties if insufficient funds are available to process transactions.

The Commonwealth charges $35 for a dishonoured periodic payment, cheque or direct debit, while the ANZ charges $10.

Both Westpac and the National Australia Bank have removed penalty fees from concession accounts.

“People on low and fixed incomes are hit hard by unfair bank penalty fees, which can quickly swallow a large chunk of a limited income,” Consumer Action’s director of policy and campaigns, Nicole Rich said in a statement.

“The banks need to stop punishing people who are already struggling to make ends meet.”

The Commonwealth held the largest number of household deposits in the country, yet its fees were the “least socially responsible”, CHOICE’S senior policy officer Elissa Freeman said.

“If Westpac and the NAB can scrap penalty fees, why can’t the Commonwealth Bank?”

Consumers may face penalty fees in cases where a transaction account is overdrawn, if there are insufficient funds to process direct debit payments, or credit card limits are exceeded.

AAP