Fee-free overseas banking the new frontier

Bankers who thought there was no mileage left in marketing fee-free transaction accounts will be watching to see how Citibank fares with the revamp of its Citibank Plus Transaction Account.

Citibank has pushed the fee-free concept a couple of steps further by removing all additional service fees, such as bank cheque issuance, cheque dishonour and extra statement fees.

It has also removed fees for overseas ATM withdrawals, overseas point-of-sale transactions and overseas funds' transfers.

Citibank's head of retail banking, David Mouille, said: "We have removed absolutely everything. We claim to have the only fully free account in Australia."
 
And, to put some icing on the cake, it has included transaction account customers in a dining partnership program that was developed for its credit card business. Citibank transaction account customers are eligible for a free bottle of wine when they dine at any of 300 partner restaurants.

Citibank is not the only bank offering giveaways to attract transaction account business.

In June, HSBC launched its Day to Day Account, with no account-keeping fees and a $10 monthly "feebate" for customers who deposit at least $2000 into their account each month.

ING Direct also uses rebates to attract business. The bank puts 50 cents in to its Orange Everyday customer accounts each time the customer takes out cash of more than $200 during a debit transaction.

Banks have been going fee-free since 2009, when National Australia Bank announced that it would get rid of all transaction banking fees. At the time, all the banks were reviewing their exception fees (overdrawn account, overlimit credit card spending, late payment and other such charges) but NAB went a step further.

Other banks argued that there was no need to drop monthly account fees because consumers didn't mind paying them. It was the exception fees that annoyed people.

A number of banks still charge account-keeping fees, including ANZ, which charges $5 a month, Commonwealth Bank ($6 or $4) and Westpac ($5 on some accounts). These fees are waived if minimum account balance or other tests are satisfied.

NAB executive general manager, consumer product solutions, John Salamito, told Banking Day earlier this year: "We knew that consumers disliked monthly fees as much as exception fees and we could see a competitive advantage in getting rid of all fees on our transaction accounts."

In April, ING Direct reported 90,000 customers had opened Orange Everyday accounts, a fee-free transaction account that was launched early in 2010.

ING Direct executive director of savings, Brett Morgan, said: "People do care about the monthly fee."

Removing fees for overseas transactions is the new frontier. Mouille said: "A significant number of our customers come from abroad and still have family outside Australia. They travel a lot.

"The proportion of people from Asia that we bank is well above the population average, but, even if you leave that aside, the globally oriented people in the community are growing all the time."

Citibank's fee-free overseas ATM deal works on any bank's ATM. Mouille said Citibank had an arrangement with Visa, whose network handles the transaction processing, which meant the withdrawal fee was not passed on to the customer.