Gone are the days of banking service affordable to all in need.
Save for some relief measures of some banks, banking service has become less accessible and increasing costly to the disadvantaged and elderly.
In a relatively short span of 5 years since 2001, the fees and charges of banking service have grown not only in their levels but also in diversity.
This was borne out of a recent survey which the Consumer Council conducted on 23 banks in May. The findings were compared with a similar survey on 19 banks in January 2001.
The results are as revealing as they are enlightening to consumers in the face of new and surging fees and charges in banking service. Some highlights of the survey include:
Account opening balance - once only optional but now a requirement, from $1,000 to $3,000 (5 banks), $500 (1), $100 (5), and $0 to $10 (12).
Inactive account service charge - in 2001, 74% (14 out of 19 banks) surveyed imposed this charge but this has risen to 91% (21 out of 23) ranging in fee from $50 to $300 every 6 months, up from 20% to 100%.
Low-balance account service charge - from only 2 banks in 2001, the number has risen to 18, charging $10 to $200 per month; but 16 of them offer to waive such a charge to the elderly, those aged below 18, or on public assistance scheme.
Service charge on low-balance current account - this is emerging as a latest new service charge. In 2001, none asked for service fee on low- balance current account; but now 4 banks have taken the lead to introduce such a charge.
Low-balance interest rate policy - 18 of the 23 banks have begun to reduce interest rate payment on low balance, ranging in reduction from 0.05% to 3.1%. 12 of the banks have even adopted zero interest rate policy on such accounts.
The Council is concerned also over reports that some banks are contemplating counter transaction service charge in an apparent bid to drive customers to use self-service banking centres.
These drastic changes have taken place against a background of intense growing competition in the banking industry following the deregulation of interest rates in 2001.
Market liberalization has brought benefits to the consumers due to a narrowing of the interest rate spread as interest rates for depositors went up and rates for debtors came down.
One recent report issued by the Census and Statistics Department indicated that the shrunken interest rate spread has caused banks' earnings in interest margin to fall from $90.6 billion in 2001 to $76.9 billion in 2004, down 15%.
It is the commercial decision of banks to derive income from different sources, including interest margins or fees and charges.
In addition to fee rises, the survey also found fewer retail bank branches these days. The survey showed a progressive phase out of bank branches over the years from 1,463 in March 2001 to 1,209 in May this year, an overall reduction of 254 branches or 17%.
Compared to 2001, 11 of the 23 banks surveyed have trimmed down on the number of branches to the extent of 2% to 41%. But not all banks have followed this trend. Six in fact have expanded the number of branches from 3% to 67%.
Reduction in bank outlets will affect in particular the elderly and the grassroot sector of the community who, for one reason or other, would not be able to use online banking and make transactions through ATMs (Automatic Teller Machine).
Nonetheless, against this background of fewer bank branches has emerged an impressive growth in the number of ATMs, and online banking transactions. Increasingly, consumers are turning to such new banking channels.
According to the Hong Kong Monetary Authority (HKMA), the number of personal online banking accounts has grown from 1.1 million in 2001 to 3.3 million in 2005, a remarkable threefold increase.
A survey conducted by the Hong Kong Association of Banks (HKAB) at end of 2005 also showed that, based on a large number of retail banks surveyed, banking transactions conducted at branches now on average accounted for around 30% of the total banking transactions.
In their own interest, consumers are advised to take sensible steps to avert unnecessary banking service charges.
As astute consumers, they will do well to merge their accounts spread over different banks into one to help boost the total sum of balance. This will not only avoid account service charge on low-balance but also earn higher interest rate on their deposits.
Moreover, they should shop around and consider choosing banks that waive charges on low-balance accounts to certain disadvantaged groups of customers, or those that do not yet require such charges at all.
Low-balance account depositors can also take advantage of the special offer of some banks to waive charges on condition these customers use the ATMs to conduct cash withdrawal or transfer transactions.
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