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How to avoid paying bank penalty fees
Learn about when additional fees may apply to your account and what you can do to help keep these costs down.
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The term "penalty fees" is sometimes used to describe the charges that banks and other providers may apply when an account is not kept in good standing. For example, if someone with a credit card does not pay the minimum amount required by the due date, they could be charged a late payment fee.
These charges are more commonly referred to as "exception fees" in Australia. Following widespread banking reforms and industry scrutiny over the past few years, there are very few of these fees that currently apply to credit cards and other bank accounts. But they could still add to the cost of your account if you ever have to pay them. So here, you can learn more about what exception fees could apply and how to avoid them.
What types of exception fees may be charged?
The range of fees that could apply to your credit card or other bank accounts varies depending on your financial institution. But some of the most common include:
- Credit card late payment fee. If you don't pay the minimum amount required by the due date on your statement, this fee may apply to your account.
- Payment dishonour fee. This fee may apply if you have set up a periodic payment or a regular direct debit from your account and the payment is declined due to insufficient funds. A payment dishonour fee could also apply if you have set up an automatic repayment to your loan or credit card account and the payment is declined.
- Credit card overlimit. This is when your credit card spending exceeds your set limit. Following the 2012 credit card reforms, this fee can only be applied to accounts that were opened before July 2012.
- Overdrawn account fee. Similar to a credit card overlimit fee, this charge applies when you write a cheque or make a debit card transaction that takes your account overdrawn.
Other exception fees that could apply to your accounts
These fees are less common than the ones above, but are still worth keeping in mind:
- Outward cheque dishonour. This is when you write a cheque that is not covered by sufficient funds at the time the cheque is presented for payment, causing the cheque to bounce.
- Inward cheque dishonour. This fee applies when someone writes a cheque to you but their account does not contain sufficient funds to cover it at the time you present it for payment.
- Stop cheque. This happens when you have written a cheque and given it to someone then decide that you want to cancel it. If the cheque is presented for payment after it has been stopped, you may be liable for another fee.
How much do bank penalty fees cost?
The cost of these charges largely depends on your bank and the specific account. In general, most exception or "penalty" fees range from $4-$20. To give you some idea of the charges that could apply, the table below shows what penalty fees Australia's major banks ANZ, CommBank, NAB, St.George and Westpac charge and how much they cost if they apply to your specific account.
| Bank | Dishonour fee | Overdrawn account fee | Credit card late payment fee | Credit card overlimit fee |
|---|---|---|---|---|
| ANZ | $6 | $6 | $20 | $20 |
| Commonwealth Bank | $5 | $15 | $20 | $10 |
| National Australia Bank | $30 | N/A | $15 | N/A |
| St.George | $9 | $9 | $15 | $15 |
| Westpac | $5-$9 | $15 | $15 | $15 |
Note that these penalty fees may not be applied to every account you have. Each lender has its own set of account terms and conditions, so it's important to refer to your credit card or bank account Product Disclosure Statement for full details of which fees you could be charged and how much they will cost you.
Avoiding the penalties
Here are some ways by which you can guard against being hit by bank penalty fees:
- Compare products. If you're looking for a new credit card or bank account, comparing several options will help you find one with the fewest fees, or at least with the lowest charges.
- Contact your bank. If you are charged a penalty fee that you feel is unfair, you can contact your bank to query penalties and challenge them. Ask that they be reversed. This has proved very successful for many consumers.
- Read the fine print. It's important to go through your credit card or bank account Product Disclosure Statement so that you know when fees may apply so you can reduce or avoid them.
- Know the state of your accounts. Make sure you know how your income stacks up against your expenditure, and never assume that money due has entered your account without checking first. Regularly review your account details so that you're aware of what's going out and coming in for each account. This will allow you to budget accordingly and could help you avoid penalty fees as a result.
- Set up autopayments. Most banks let you set up automatic payments for your credit card accounts. You can nominate to have the minimum amount, full amount or a dollar figure regularly deducted from your transaction account before the due date. This will reduce the risk of late payment fees.
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Ask an Expert
Hello I recently went on a holiday to New Zealand and we ran out of money we allocated so went to and atm and withdrew money from our account now looking at statement on top of being charged a 3.00 fee per transaction the bank has charged a $35 international transaction fee is this legal as we have already paid high fees for this l?
Was a visa debit card and never went over limit etc was our own savings.
Hi Nick,
Thanks for your question.
You might want to review your card conditions of use to see the specified fees for overseas cash withdrawals. Typical fees for overseas withdrawals can include a foreign transaction fee (which is likely the 3% fee you mentioned) and may also include an international transaction fee. Your bank needs to clearly set out the fees and charges you will incur for every type of transaction, so you can see if they have and then discuss the matter with them.
I hope this has helped.
Thanks,
Elizabeth
Could you tell me the law on charging my home loan from one bank to a other bank, are there any fees?
Hi Len,
Thanks for your question.
Please refer to our guide on avoiding exit fees when repaying a home loan early. You can use our switching costs calculator to help work out the savings from moving from one loan to another.
I also recommend getting in touch with a licensed mortgage broker. A broker can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.
I hope this helps.
Cheers,
Jacob