Paperwork Stops Us From Switching Banks

The Commonwealth Bank's large increase in loan interest rates this week has many people saying that they'll switch banks. However, a new poll suggests that only a tiny fraction of us will ever get around to doing so.

Picture by Eva The Weaver

As part of its Better Banking campaign to simplify bank switching and reduce unnecessary fees, consumer advocate Choice commissioned a poll asking people if they'd considered switching banks in the last two years. In the survey of 1,203 people, a massive 79% hadn't even considered switching, and only 8% had actually done so.

Unsurprisingly, too much paperwork and hassle was the most common reason people who had considered switching didn't get around to it, closely followed by not being able to research the best deal and a general belief that switching won't make much difference. Despite occasional minor regulatory reforms, bank switching is still a major hassle. Choice's campaign aims to see those rules simplified, though with the current anger over interest rates that element may not receive as much attention.

Switched financial institution recently and found it worth the effort? Tell us your story in the comments.

Choice

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Comments

    I recently moved all of my accounts away from the Commonwealth Bank, after a particularly bad run with their home loan "specialists". It was a complete pain in the neck and I hated every minute of it, but I'm ever so glad now that I don't have to deal with that bank any more.

    In short, it's a horrible transition, but if you really loathe the bank you are with, the work is worth it in the end.

    I am not sure what the hassle is that you talk of. I have done this a couple of times, and if you use a Mortgage Broker, the only hassle you have is applying for the new loan. The fees involveed can be a problem, but you sign a form(s) with them authorising the new lender to payout the old lender, and it is done.
    Usually the broker is paid by the new bank, and if he/she is any good, they can get you a reduced rate, and greatly reduced application fees.
    Changing from 'the bank' to a private lender has saved us 1000's (even after penalties)

    It's all phyoclogical. If a competitor bank said "we'll pay you $500 a year for 30 years if you fill in this form to transfer your mortgage" people would be beating down the doors to change banks.

    We had two seperate houses and lendors, to buy our current house we had to get second mortgages on the existing houses and obviously a new mortgage for the new house. While it is time consuming each time we went through the process it is a relativley easy process to apply for a mortgage and the paperwork is relatively simple when you go through it (just so much though). as I wrtie this we are in the middle of combining all our mortgages with one bank (st george) while it is time consuming again it is thoroughly worth market testing the bastards, we are looking at now saving $21K in interest over the next 10 years, this is just closing down the money we would have given the banks in profit. While the above makes it sound like we must have a lot of money, we dont we just have a lot of debt and thanks to some smart/ lucky oppurtunities we grabbed we have a bit of capital now. I've never thought the banks make it hard for you to move mortgages, just like eveything you do in life you have to do a bit of homework and test the market, not take things at face value and negotiate hard. Just like you wouldn't walk into JB HiFi and pay sticker price you shouldn't do the same with a bank.

      hmmm.. just noticed the page is full of st.george adverts and I mentioned that is who we have just combined accounts with. God I hate to support advertising but for us (due to how we like our accounts set up) they are one of the best lendors on the market. Just be wary that Westpac until now has not been interfering with their operations, if they change their minds though thats when we may have to start looking for a new lendor again

    It's not just limited to Bank account. Pretty much anything to do with large institutions now days is painful and unnecessarily complicated.

    Just recently I consolidated 3 super accounts into 1, most painful band-over-backwards process I've had the please to undertake.

    If the government want to help out people (that's a pretty big IF), they should do more to remove all the red tape and bureaucracy that is filling our lives.

    For us, it's fees from stopping us to switch, not paperwork.

    This looks like a business opportunity. Provide a service that transfers all accounts, direct debits, and mortgages from one bank to another, or to a credit union. For a fee of say $100.

    Surely a loan consolidation company could do this largely within their existing skill-set.

    My problem with switching isn't exit fees, it's the millions of scheduled payments that come out of our savings (Mortgage offset) account - Setting them all up again is probably a solid 2 day job, and for the $500 a year I'd be better off just working an extra 2 days this year :)
    Agreed though - If bank account numbers were portable the way Mobile phone numbers are this would be a lot less painful (at least then Direct Debits would continue uninterrupted).

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