Winston Churchill's coins offer clue to bank motives

MELBOURNE, AUSTRALIA - SEPTEMBER 22: Generic 'Big Four Banks' - ANZ Bank, Commonwealth Bank, NAB Bank and Commonwealth Bank. General view of people walking past bank atms on 22 September, 2015 in Melbourne, Australia. (Photo by Paul Rovere/Fairfax Media) Generic banks
MELBOURNE, AUSTRALIA - SEPTEMBER 22: Generic 'Big Four Banks' - ANZ Bank, Commonwealth Bank, NAB Bank and Commonwealth Bank. General view of people walking past bank atms on 22 September, 2015 in Melbourne, Australia. (Photo by Paul Rovere/Fairfax Media) Generic banks

The unexpected "generosity" of the Commonwealth Bank in abolishing fees for withdrawals at ATMs has been well publicised. As expected, all the other banks quickly followed suit and there were headlines galore about the difference it would make to their customers.

It made no difference to yours truly. As I have written here previously, I freed myself of ATM fees years ago by simply using an ING debit card - for this product any fees charged by other banks are reimbursed to me by ING.

But it did make me think of a story about Winston Churchill's valet. One morning he woke late, to discover that he did not have time to press the great man's trousers. To rectify the matter, he grabbed the loose coins that Churchill had left lying on the bureau and polished them. When Churchill came to dress he was so excited at seeing his coins polished, that he did not notice his trousers had not been ironed.

So, the question of the day is the real motive behind this sudden removal of fees. And if you think about it, it's not hard to find. Australia is becoming a cashless society; that's right, cash is fast becoming redundant.

Australia has just passed the point where there now are more small transactions made by PayPass and payWave than are made by cash. As a result, the volume of withdrawals from ATMs is dropping. The banks are well aware that most ATMs will be redundant within 10 years. If you look around you now, it is evident that ATM numbers are already being reduced.

Just four weeks ago the laws were changed so that the fees that can be added by any organisation that accepts credit card payments are limited to the actual cost to the organisation.

While this is welcome, it is really of little practical benefit to the consumer, because merchants suffer a range of fees, including terminal fees and monthly licence fees, that are added to the percentage the banks take out of each transaction. Therefore it's impossible to know if you are being ripped off or not. What we do know is that the consumers will be the ones paying the fees, and that these fees will keep rising as the cashless society gathers pace.

Now think about one of the fastest-growing areas of bank business: credit cards. Their use is growing rapidly as more and more Australians battle to pay their bills, and the interest rate for anybody who does not pay the entire bill on the due date is about 19-20 per cent. This has been unchanged for years, despite the cash rate being the lowest in history.

If the banks were serious about reducing fees, interest on credit cards would have been the best place to start.

This may be an appropriate time to rethink our attitudes to some investments. For years, I have warned prospective investors about the dangers of investing in taxi licences and/or ATM machines.

The figures look good when the offer is being pitched to you, but the whole scheme can go belly up if the rules change. We have already witnessed the carnage being suffered by owners of taxi licences - I reckon owners of private ATMs will soon be in the same boat.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au

This story Winston Churchill's coins offer clue to bank motives first appeared on The Sydney Morning Herald.