Australian Households Face Rising Bank Fees Amid Cost of Living Pressures
Australian households have seen a significant rise in bank fees, driven by increased credit card and personal loan usage, amid ongoing cost-of-living pressures.
Australian households paid almost 10 per cent more in bank fees in the 2023/24 financial year, driven by a surge in credit card and personal loan usage due to the rising cost of living.
This resulted in a five per cent increase in fee revenue for banks, marking the first annual rise in fee earnings in seven years, as reported in the Reserve Bank’s January bulletin.
Australians experienced an 11 per cent rise in credit card fees, largely due to increased spending by card-holders overseas as international travel resumed. RBA analyst Robert Gao noted, “With more households using their Australian credit and debit cards at overseas businesses, banks earned more fees on international transactions and foreign currency conversions.”
Additionally, personal loan fees surged by 34 per cent, reflecting a rise in establishment and transaction charges as more Australians sought credit to manage cost-of-living challenges.
Despite the increase in fee revenue, Australian households saw their real disposable income drop below 2017 levels, impacted by high interest rates and inflation. Many mortgage holders faced steep repayments as fixed-rate loans matured, prompting them to renegotiate or refinance their loans.
This trend contributed to a five per cent increase in home loan fee earnings from negotiating and establishing new loans, alongside discharging previous loans. A reduction in home loan cashback offers further supported bank revenues.
Furthermore, banks collected three per cent more from deposit fees, with more Australians using debit cards while abroad. However, financial regulator ASIC found in 2024 that several major banks had unfairly kept two million low-income Australians in high-fee accounts, requiring refunds totaling over $28 million.
The majority of these fee refunds are anticipated in 2024/25, with the effect on banks' revenue yet to be realised.
While charges for households increased, they still represent a minority of overall bank fee revenue, with large businesses accounting for around 40 per cent, medium-sized businesses for a quarter, and small businesses 10 per cent. Fee revenue from business lending rose by five per cent as more companies sought lines of credit.
