When it comes to stashing away your money in a safe place, getting a loan, credit, or investing, there are a litany of options available today.
100% member owned
Personable customer service
Transparent business practices
- Transparency 4.8 (260)
- Customer Service4.8 (296)
- TopicsATM Experience (8), New Account (50), Loan Application (73), Credit Card Application (16), General Transactions (167) and Business Banking (22)
- Transparency 4.7 (514)
- Customer Service4.7 (576)
- TopicsATM Experience (17), New Account (274), Loan Application (267), Credit Card Application (57), General Transactions (192) and Business Banking (26)
- Transparency 3.9 (40)
- Customer Service3.9 (45)
- TopicsNew Account (10), Loan Application (28), Credit Card Application (2), General Transactions (16) and Business Banking (2)
- Transparency 4.6 (98)
- Customer Service4.6 (107)
- TopicsATM Experience (25), New Account (19), Loan Application (33), Credit Card Application (11), General Transactions (86) and Business Banking (10)
- Transparency 3.9 (60)
- Customer Service3.8 (65)
- TopicsNew Account (43), Loan Application (1), General Transactions (17) and Business Banking (4)
Types of Banks
Also called digital-only banks or neobanks (meaning 'new banks'), online-only banks are rightly a newer addition to the banking market.
It's important to note that online-only banks are designed to be 100% online - they have no physical branches you can visit. This also differentiates them from online banking options offered by traditional banks, such as Netbank and Westpac online banking.
- Can be more financially rewarding with more competitive rates and fees, due to costs cut from being branchless
- Convenient online operation means 24/7 access to banking services after downloading a banking app
- Faster service and exclusively digital services are offered that may be unavailable with online banking apps of traditional banks
- Services are limited especially when it servicing credit card and home loan customers. However, some neobanks partner with chartered banks and credit unions to give loans to individuals and businesses.
- Designed primary for smartphones via a banking app - this may be unappealing if don't like relying on technology for life admin
- No physical branches means that if you prefer face-to-face banking customer service, you may be disappointed
- ATM fees will often be charged when you use a neobank debit card, as many online-only banks don’t have their own dedicated ATMs
- Potential start-up status means online-only banks can lack the years of experience and credibility of reputation that builds up over time, which some banking customers may value.
- Transaction accounts and savings accounts
- Digital payment and money transfer
- Home loans or other small loans are sometimes offered
Services often unique to online-only banks
- Instant loan approval
- Digital wallets such as Samsung Pay, Apple and Google Pay
- Virtual cards
- Online sign up vs in-branch sign-up
- Spending trackers and budget setting
How safe are online only banks?
Online only banks are as safe as traditional banks and customer-owned banks. This is because to trade as a bank, they're required to be licensed by the Australian Prudential Regulation Authority as ADIs - Authorised Deposit-taking Institutions. This means deposits of up to $250, 000 are protected under the government's Financial Claims Scheme - and that your dealings with licensed online-only banks are safe.
Online-only banks tend to use similar security measures as the internet banking portals of bigger banks, such as multi-factor authentication and biometrics. Since most online banks are still pretty new, they are often designed with advanced digital security measures.
Privately Owned Banks
- Wide range of banking services, including more personalised services like private banking, which includes wealth management.
- Physical branches are often plentiful if you prefer face-to-face customer service, and if you don't mind dropping in to the bank on your lunch break.
- The multitude of ATMs means accessing your money at a pinch with zero ATM fees is more likely to be a reality.
- High fees and rates can be charged for a number of occurrences, such as penalty fees for an overdrawn account. Rigid rules mean these fees are rarely waived.
- Profits don't go to customers as they're primarily distributed to the Board of Directors and shareholders first.
- Unethical investments are more common practice, done in order to maximise profits. For example, all Big 4 Banks lend money to the fossil fuel industry.
Privately-owned banks are also known as traditional banks, chartered banks, retail or commercial banks. They’re probably also what first springs to mind when you think of a bank.
They include the ‘Big 4’ Banks - Commbank, NAB, Westpac and ANZ. These banking giants have the lion’s share of banking customers in Australia, and they also own smaller subsidiary companies. For example, Westpac owns both St. George Bank and RAMS, and Bankwest, including the Bankwest online banking portal, is owned by the Commonwealth Bank.
Privately owned banks offer a diverse range of banking services, often thanks to a combination of physical bank branches and online banking options.
These services include: Bank accounts and savings accounts, home loans, credit cards, reward credit cards, term deposits, personal loans, car loans, online banking portals, debit cards and international money transfer.
There are also plenty of smaller privately owned banks, which often service a particular state, such as the Queensland Country Bank.
Local banks often have more of a community focus than big banks, and while their profits aren’t shared by members, sometimes their benefits are reported to be more similar to customer-owned banks rather than big banks.
- Profits are reinvested into the business in the form of reduced fees and rates, and improved products and services.
- Fees and rates are often more competitive than private banks. It's worth it to shop around instead of automatically opting for the household names in Australian banking.
- Customer satisfaction is higher for members of customer-owned banks compared to privately-owned banks, according to a 2020 Roy Morgan survey.
- Community initiatives are more generous than profit-driven banks, and customer-owned banks are less likely to engage in unethical investing.
- Limited eligibility may apply, as some credit unions may be especially established for members of a certain profession or geographic location. For example, only current or retired teachers and their family members can join Teachers Mutual Bank.
Customer-owned banks include mutual banks, credit unions and building societies.
While a mutual bank has taken the administrative steps required by APRA to be called a 'bank' instead of a credit union, these three bank sub-types are very similar in operation. Importantly, they’re all owned by their customers or members, rather than private investors or shareholders.
The ethos of customer-owned banks is that profits go into improving products and customer service, rather than solely making a bank’s private stockholders and Board of Directors richer.
Customer-owned banks usually offer the same range of banking services provided by the bigger players, including lending products (home loans, personal loans, car loans and credit cards) and deposit products (savings accounts and term deposits).
In addition to reinvesting profits back into benefitting members, often customer-owned banks adopt more of a community focus in a broader sense.
For example, Bank Australia - the top rated bank on ProductReview.com.au - has a 927 hectare Conservation Reserve in Victoria, created for the purpose of wildlife and land conservation.
A fair few customer-owned banks also actively avoid lending money to the fossil fuel industry unlike the Big 4 Banks.
Teachers Mutual Bank was even recognised in 2019 as one of the ‘World’s Most Ethical Companies’ by the Ethisphere Institute.
What else to look for in a bank
Competitive rates and fees
- Interest rates: There will likely be a number of complex variables to consider, such as the way interest is charged (e.g. fixed rate, variable rates, partially-fixed rates, etc.) However, generally, the interest rate should be high for a return on savings and other investments, and low if you're purchasing a lending product - for example, a home loan.
- Account keeping fees: Many banks today have zero monthly account-keeping fees. This should especially be the case if you're a full-time student. While some banks have a seemingly low fee of around $5 per month, this can add up over time ($300 in 5 years). You'll likely be happier keeping this money in your proverbial pocket.
- Other conditions, fees and charges: These can include penalty fees for an overdrawn account, phone banking fees, ATM fees and overseas transaction fees. In terms of conditions, you may only qualify for bonus interest rates for a savings account if you meet the minimum monthly deposit amount, don't withdraw any money, and have a linked transactions account with the same bank.
If customer service is important to you, it can be helpful to do a bit of research and read reviews, to find out which banks perform the best in this area.
If talking to a person to help you with your banking is a priority to you, you might prefer banks with physical branches and a reliable phone banking service. Online-only banks mainly have chatbots, so it's up to you whether this counts as a personalised customer service experience.
Convenience is subjective. For some people, being able to do all their banking on a smartphone app is convenient, and to others, popping into a bank branch on their lunch break is more convenient. Banks with a healthy number of ATMs also get extra points for convenience, as you won't be hit with annoying transaction fees each time you withdraw.
If you have a wealth portfolio - for example an investment property - you may like to take advantage of private banking services, and a traditional bank may be more convenient for you.
In short, consider what would be convenient for your banking purposes and your lifestyle, and factor this into the decision of which bank to go with.
How transparent and open a bank is about its business practices is important. According to the ABA'a Banking Code of Practice 2020, transparency for a bank mainly involves: clear and timely communication, as well as engaging in accountable dealings with customers.
What this involves will depend specifically on the time of service offered. For example, according to the Code of Practice, customers should be notified of transaction fees before they're incurred. For credit cards, customers should be reminded when an introductory offer is about to end, and credit-card holders should be able to reduce credit limits or close their accounts online.
To get a better overall picture of a bank's transparency, reading real-to-life reviews from customers of Australian banks can be helpful.