Those zero interest credit card offers can sure be enticing. Who doesn’t want to pay zero percent on what they spend? You can swipe the card and not have to worry about paying interest for a certain period of time. Or how about interest rates that are lower if you’re a new customer? Or a mortgage that gives you special payment plans in the beginning? They all sound good, right?
Of course they do, but these types of financial products are also what we refer to as the “lazy tax”. How so? Typically, consumers will shop multiple stores to get the best price on things like clothing, electronics and groceries, but they don’t have the same shopping strategy when it comes to banking products.
Banking products can be difficult to understand and come with tons of fine print. If you don’t read the fine print and fully understand what you’re signing up for, you could end up paying more money in the end, or being stuck in a product that’s hard to get out of. Your inexpensive mortgage payment could balloon a few months or a few years down the road, and what happens if your zero percent interest credit card has a balance on it when the promotional financing runs out?
Due to the banking industry not having to share consumer information, it’s very hard to determine if you’re getting the best deal or not. Due to this, there’s a movement going on to what’s known as “open banking”. Open banking allows consumers to share data with each other so that people can see what kind of deals others are getting with their banks. Consumer data is extremely valuable to the banks, so if the information is able to be spread, it’s win for consumers as they can truly compare products, services and the pricing and fee structure for both.
While this practice is currently in force in the United Kingdom, it’s not yet available in Australia. Even so, the Reserve Bank and the Australian Competition and Consumer Commission are very supportive of open banking. So while you may have to wait a little longer for consumer to consumer information to be the new norm, you can still do yourself a favor and make sure that you’re reading the fine print of any financial product you sign up for. You can also do your own research and ask around to see what others are paying at their banks.