Money has poured into the Big Four Banks even though they offer lower interest rates on savings accounts compared to the smaller banks and credit unions, because of the mistaken fear that smaller banks could collapse because of the global financial crisis.
This is despite the fact that the Prime Minister has promised that he will not let any bank big or small go under.
According to research conducted by Core Data, if deposits with the Big Four banks had been with smaller banks, savers would have earned at least $3.6 billion more in interest over the past year.
The huge rise came after the Global Financial Crisis prompted a fight by consumers to the perceived greater safety of the Westpac, Commonwealth, NAB, and ANZ banks, rather than chasing highest returns.
When the financial crisis was at its peak Mr. Rudd guaranteed that savings with a credit union or building society was as safe as with Westpac or Commonwealth Bank.
Deposits rates on the big bank's high interest internet accounts have underperformed those of many smaller rivals by about 1 per cent a year.
A number of smaller banks, building societies, and credit unions also covered by the deposit guarantee are paying 4 per cent or more on their internet accounts with no conditions attached.
This means that on $10,000 in savings, Big Four customers are losing an average $100 a year in interest alone, or one-third of the total return made on online accounts at the major banks, despite no difference in risk.
Information collected by Core Data revealed that during the crisis peak last year consumers withdrew their money from banks like Macquarie and ING and deposited it with banks like CBA or Westpac on the same day.
People still feel that their money is the safest with one of the Big Four because they believe that the Australian Government will never let one of the Big Four banks fail.
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