Bank fees surged nearly 10 percent over the past year as Australians leaned more on credit cards and personal loans to navigate cost-of-living pressures.
The Reserve Bank of Australia (RBA)’s latest bulletin, released on Jan. 30, marks this as the first increase in fee earnings in seven years.
Credit Card and Loan Fees Drive Revenue Growth
RBA analyst Robert Gao linked the 11 percent rise in credit card fees to a rebound in international travel.“With more households using their Australian credit and debit cards at overseas businesses, banks earned more fees on international transactions and foreign currency conversions,” he said.
Meanwhile, personal loan fees soared by 34 percent, as financially stretched Australians faced rising charges to access credit.
Mortgage Refinancing Adds to Banks’ Revenue
Rising home loan fees also contributed to the banks’ earnings boost, with mortgage holders facing higher repayments as fixed-rate loans expired.
Many borrowers sought new loans or refinanced, leading to a five percent increase in home loan fee revenue.
Gao noted this was due to costs associated with negotiating and establishing new loans, as well as discharging previous ones. A decline in home loan cashback offers also contributed to the revenue rise.
ASIC Crackdown on High Fees for Vulnerable Customers
Australian banks have faced scrutiny for excessive fees, particularly those affecting low-income customers.In July 2024, an ASIC review found that ANZ, Bendigo and Adelaide Bank, CBA, and Westpac systematically charged high fees to vulnerable consumers, including First Nations Australians and Centrelink recipients.
As a result, over $28 million was asked to be refunded over the next 12 to 18 months.
ASIC Commissioner Alan Kirkland condemned the banks for failing to act sooner. “Banks knew that many of these customers on low incomes were in inappropriate high-fee accounts, and it has taken ASIC’s intervention to force them to act,” he said.
The review also found that most banks required customers to navigate complex opt-in processes to access low-fee accounts, with some forced to travel long distances to a branch.
Following the investigation, over 200,000 customers were moved to low-fee accounts, saving an estimated $10.7 million annually.
While acknowledging the banks’ corrective actions, Kirkland warned against future failures.
“This is the second report from ASIC in the last two months that highlights where banks have failed to put customers’ needs at the heart of their operations,” he said.
