The banks have called our bluff in lifting loan rates by more than the Reserve Bank’s official increase.

So what are you going to do about it?

Are you going to be a wimp and just cop it on the chin, as your bank is hoping, or are you going to fight back, make a point and save some cash.

The banks assume you’ll whinge for a few days, do nothing, move on with your life, pay the extra and add to their profit growth.

The banks whinge about doing it tough but then produce record profits results.

They must think we’re stupid. Unfortunately, the reality is they’re right.

There’s more chance of getting a divorce than changing banks.

Our view is that you have no right to whinge unless you’re prepared to do something about it.

This is how you fight back.

1. GET THE FACTS

When is the last time you sat down and looked at all the products and policies you have with your bank… and how much you pay for the privilege.

First step is to list down all those products… loans, deposit accounts, insurance policies, credit cards, superannuation and other investments.

Then look at the statements for the last year and add up all the bank fees and premiums deducted from those accounts. If you want to really scare yourself, add up all the interest which has been paid. Then, to be fair, add the interest and investment returns earned.

Most people are amazed at how many accounts are on the list and can automatically see which obvious redundant accounts can be culled.

What the list also does is give you an idea of how big a customer you are to the bank and how much you’re contributing to bank profits. It’s the first step in negotiating a better deal.

2. CHECK THE ALTERNATIVES

Finding alternatives and doing your comparative financial shopping is so easy online.

Our favourite websites are ratecity.com.au and infochoice.com.au. Both sites have extensive comparative tables of every type of loan and deposit being offered by Australian financial institutions. They also provide research on the different products and make recommendations.

These two sites are an absolute must to visit and you’ll be amazed at how many options are available. You’ll also be stunned by how much extra you’re paying on your current loan.

For example, did you know there are standard variable home loans on offer for between 6.3-6.6 per cent from established credit unions and non-bank financiers. Don’t forget to read the fine print on some of these low rate loans because they can come with quite establishment and exit fees.

We also know it’s not all about the rate, as most people have security as a high priority. Just remember these non-bank financiers have to operate under the same regulations as our bigger banks.

3. DEMAND A BETTER DEAL

Go to your bank, talk to a bank staff member (see them in person rather than over the phone or online) and demand a better deal.

You have the facts. You know how much you pay in fees and what products you have. You’ve been online and researched other options available, now you have to confront your existing bank for some action.

Armed with all this knowledge show them what a good customer you’ve been, explain that you’re prepared to shift institutions but are quite happy to stay if they sharpen their deal to match what you can get elsewhere.

The more products you with your bank (loans, deposit accounts, insurance, credit cards, investments), the more powerful your argument and the better the deal to ask for.

Banks know it is better (and cheaper) to keep a good existing customer than go and find a new one.

Don’t be shy. Be confident, be forceful but be professional.

4. VISIT THREE ALTERNATIVES

It’s all very well to talk and research, but “doing” is totally different.

Actually contact, or visit, three other financial institutions to discuss your requirements and the process needed to make a change.

Again, explain what a good customer you’d be, you’re annoyed with your existing bank and how you’re ready to change.

But still try for a better deal. Sure you’ve been attracted by the advertised rate on offer but still ask whether they can do even better. They can only say no, so it’s definitely worth a try.

5. BE PREPARED TO CHANGE

Crunch time.

You have the facts, researched the options, discussed it with the bank and talked to the alternatives. The bank won’t budge and you’re fed up.

It’s time for action and that can be scary. But it’s mostly in your head. Be confident.

You’ve done the homework, you know the options, back yourself.

6. FOCUS ON ALL YOUR DEBT

With interest rates likely to continue rising next year debt management becomes a priority.

It’s important to understand the different levels, and costs, of the debt and follow some simple steps.

. pay off the most expensive debt first.

. use savings to pay down debt.

. talk to your bank if you’re in trouble and renegotiate the term of the loan to reduce payments.

A STEP TOO FAR

The Reserve Bank is certainly fixated on inflation rates and the commodities boom at the moment. We’re more fixated on Australia’s other industries which are doing it tough and on the stumbling property and building sectors.

We have a lot of admiration for the Reserve Bank and believe they have done a sensational job in managing the Australian economy. But we have this inkling that the latest rate hike could be a step too far at this time.

If the signs are stronger next year then there could be a valid argument for a rate hike. But not now, it just seems too soon with too many businesses suffering.

The situation is compounded by banks putting their rates up higher than the official rise. Borrowers don’t do deals with the Reserve Bank, they do them with the individual banks.

When the banks over step the official rise, the management of monetary policy shifts from the RBA to our commercial banks.

That’s dangerous.

SAVERS GO SHOPPING

There are always two sides to interest rate rises. Borrowers suffer and savers benefit.

Given there more savers than borrowers in Australia, it pays to keep on top of the latest savings rates on offer.

Start with the online financial sites for product comparisons and keep an eye out for the regular “specials” on offer from different institutions to plug their funding gaps.

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