Article by David Press (B.Comm)
Whether you’re a professional or not, ‘professional packages’ offered by the big four banks (and other institutions) are a fantastic opportunity to make some real savings on your banking fees, interest charges and insurance premiums.
Originally offered to professionals, the packages are now offered to all customers with the size of the loan being the main determining factor. The common benefits offered in ‘professional packages’ are a discount on their standard variable interest rate (tiered to loan size) and fixed loan rates, no fees on transaction accounts, no annual fee on credit cards, discounts on insurance products and bonus interest on savings accounts/term deposits, all for one annual fee in the range of $300 to $400 per annum.
Typically the packages are available to customers with a loan balance of $150k or more with maximum savings of around 0.7% pa offered on loans of $250k or more. Based on a simple interest calculation and a loan of $300k, the annual savings are up to approximately $2100. Additional to the large savings on interest charges, customers save approximately $60 pa on the waiver of transactional account fees (based on the common $5.00 monthly service fee offered on many of the big four bank’s transaction accounts). The credit card annual fee waiver offers discounts of up to approximately $150 pa. While discounts on insurance range from 5-10% (actual dollar savings being variable depending on level of protection). Deposits benefit from an extra 0.25% pa, offering additional returns only limited by the size of your deposit.
As an example, John Smith has a loan of $300k with Westpac with a current variable rate of 5.81%. His transaction account charges a $5.00 service fee each month and his credit card charges a $150 annual fee. He currently pays $850 a year in home and contents insurance premiums and has $15 000 in his savings account.
After consulting with local bank staff John elects to utilize Westpac’s Premier Advantage Package for an annual fee of $395. The savings for John are listed below:
- $2100* pa in loan interest charges
- $60 pa in monthly service fees
- $150 pa on the credit card annual fee
- $42.50 pa in insurance premiums (and a $100 reduction in excess should he make a claim)
- $37.50* in additional interest on his savings account
(*Calculations made using simple interest and are an approximate only)
The package gives John a total annual saving of $2390 pa for one annual fee of $395 (net saving of $2295 pa).
While the fees and benefits vary, the savings remain compelling and should be considered by all loan holders with a balance over $150k. Some banks offer additional benefits including no establishment fees, discounts on investment/margin loan interest rates, offset accounts, equity access and more.
Please seek advice from a trained professional at your local bank to determine if this strategy is suitable for you.
*At the time of publishing, the author was a banking representative at Westpac Banking Corporation.