How your mortgage can get you big credit card savings
Here's what we learnt by reading over mortgage contracts.
Data shows that 39% of Aussies with a mortgage have at least 1 credit card – but they may not realise they can save on the annual fee with a mortgage package.
The data, which comes from Finder's monthly Consumer Sentiment Tracker, also shows that almost a third of mortgage holders (28%) couldn't manage their money without a credit card.
A mortgage package gives you a way to bundle financial products together with your home loan, usually for a set annual fee. This can save you money on paying separate fees for your home loan, credit card and other eligible accounts.
The potential savings depend on the particular credit card you choose (plus the other features you get through the package).
How much can you save by bundling your credit card and home loan?
As an example, you could save $370 on the annual fee for an ANZ Frequent Flyer Black credit card with an ANZ Breakfree Home Loan Package. This package has a $395 annual fee, with other potential savings such as the following:
- $600 application fee (first year only)
- $120 worth of monthly offset account fees
- $60 worth of monthly loan administration charges waived (standard variable home loans only)
- Discounted home loan interest rate options
- $10 annual fee waived for one credit card additional cardholder
If you were able to get all of these features, you'd save $1,160 in fees in the first year or $765 after you factor in the package's $395 annual fee. After the first year, you'd save $560 in fees or $165 after factoring in the package's annual fee. And that doesn't include the potential savings from discounts on your ANZ home loan interest rate.
As another example, you could save $395 on a NAB Qantas Rewards Signature Card (based on the standard annual fee) with a NAB Choice Package option such as the NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier, P&I). This home loan package also has a $395 annual fee, which balances out the credit card annual fee straight away – with the added benefit of other accounts, features and savings.
Tips to get the most from a home loan package
Banks and lenders will often suggest you get a home loan package because you can access a cheaper interest rate that way. This is usually enough to convince the borrower to take out the package, but it's worth asking your bank exactly what other benefits come with the package.
The interest rate savings alone can be worth thousands of dollars: when you get a home loan package, you might get a discount of 0.10-0.15% on a fixed rate or an even steeper discount of up to 0.6-0.8% on a variable rate. On a $500,000 loan, a variable rate discount of 0.8% could be worth $4,000 on its own!
Add in the fee-free credit card – which could almost wipe out the full cost of the annual package fee – and the savings begin really adding up.
There are other benefits, too. In the above-mentioned ANZ Breakfree Home Loan Package, you also get access to a $550 credit towards an ANZ Financial Planner; other banks generally have similar offers.
You could also qualify for a discount on the first year's premium for ANZ home, landlord and car insurance.
Once you factor all of these savings and discounts in, a home loan package fee can be very beneficial. However, many people don't realise the savings and offers they could take advantage of, so they pay the fee each year – and receive no benefit in return.
What if you don't want a mortgage package?
Not everyone will want or need to bundle accounts with one bank. If that's the case and you still want to save on credit card costs, you could get a credit card with no annual fee for life. Or, if you often carry a balance, you might find that one with a lower interest rate gives you bigger savings.
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