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Basic bank accounts are changing for the better, here's how

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A basic bank account in Australia now has no minimum deposit, free direct debit facilities (including access to a debit card) and free unlimited domestic transactions. There will also be no such thing as informal overdrafts on low or no-fee accounts, and no overdrawn or dishonour fees.

These changes to basic bank accounts were approved by the Australian Competition and Consumer Commission (ACCC) as part of a broad update to the Australian Banking Association's (ABA) Banking Code of Practice.

Low income earners and farmers affected by drought stand to benefit from the changes.

"The new banking code, with the ACCC's conditions, will help ensure that the harms to low income consumers so vividly identified by the Hayne royal commission are addressed," says ACCC deputy chair Delia Rickard.

"We had concerns that the original proposed code did not fully reflect the spirit of the Hayne royal commission's recommendations about basic accounts. For example, low income customers could have been charged interest rates of up to 20% on overdrawn amounts despite not having agreed to take on an overdraft facility."

Under the new rules, banks must actively seek out customers eligible for a basic account, and publically report these efforts.

Meanwhile, default interest and fees charged on loans affected by drought and other natural disasters have been scrapped.

"The new banking code will address a significant source of harm to farmers experiencing drought," says Rickard.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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