Greater use of banking services, rather than higher charges, was behind the $11.6 billion in fees collected by commercial banks in 2007/08, a Reserve Bank of Australia (RBA) report says.
An annual survey from the RBA found the amount commercial banks earned from fees rose by $885 million, or eight per cent, in the 2008 financial year, a similar outcome compared to the previous year.
Households handed over about $4.9 billion in fees, due mainly to deposit accounts, credit cards and housing loan charges, with businesses responsible for the other $6.7 billion, the report found.
The RBA said the increase in fee income was slower than the growth in banks’ balance sheet assets.
“For both businesses and households, the growth in fee income appears to have been mainly the result of greater use of banking services rather than higher unit charges,” the RBA report said.
“As a consequence, the ratio of fee income to assets has continued to decline.”
A separate report from Australian Bankers’ Association (ABA) reached a similar conclusion.
“The main driver of bank service fee revenue is business volumes, not fee increases,” the ABA’s report said.
The RBA for the first time published figures for “exception fees”, which are charged when a customer breaches the terms of their banking product.
Examples the RBA cited included making a late payment, leaving an account overdrawn or exceeding a credit limit.
The RBA report found exception fees comprised about $1.2 billion – or 10 per cent – of the banks’ total revenue from fees in 2007/08.
Households bore the brunt of exception fees, paying $961 million during the year, mainly for transgressions on their deposit and credit card accounts.
Businesses paid $201 million.
The ABA described these exception fees as “avoidable” through some simple changes.
But leading consumer group CHOICE said the $961 million raised from exception fees needed to be “cut in half by this time next year or the government is going to have to do something about it”.
CHOICE spokesperson Christopher Zinn said the amount of bank penalty fees was “unfair” and “alarming”.
“Consumers will be furious to learn that they were stung with almost $1 billion in unfair bank penalty fees last year,” Mr Zinn said in a statement.
“These are the figures the banks didn’t want you to see and they’re much worse than even we expected.”
ABA chief executive David Bell said there was considerable scope for households to reduce their bank fees.
“By using your own bank’s ATMs, ensuring accounts are not overdrawn, and your credit card paid on time, money can be saved,” Mr Bell said in a statement.
“Avoiding overdrawn fees can be done by checking your account balances before making large purchases.”
Separate RBA figures showed consumers appeared to have sharply changed their behaviour in response to reforms to ATM charging.
The number of withdrawals made at a cardholders’ own ATM surged by 19.2 per cent in March, according to data published in the RBA’s monthly bulletin.
Withdrawals made at a so-called foreign ATM fell 6.1 per cent in the same month.
Under the RBA’s reforms, ATM owners were able to directly charge customers for using their machines, with the cost of the transaction displayed on screen.
The RBA’s bank fee survey comprised 18 institutions covering about 90 per cent of total assets in the Australian banking sector.