NAB abolishes fees and puts pressure on its rivals

NAB's move, which the consumer lobby group Choice welcomed, has put pressure on the bank's rivals to follow suit.

The changes announced yesterday are the latest in a series of fees cuts as banks seek to minimise fallout from consumer legislation that, from January, will make it easier for the size of some charges to be challenged. NAB said it would abolish its current $4 and $5 monthly account service fees on its Classic and e-Banking personal transaction accounts from January.

It has also promised to scrap the monthly account service and transaction fees on 10 other transaction and savings accounts. It will also abolish the over-limit fee and cut late payment fees on all credit cards by $25 to $5 from December. It was also considering cutting fees for business customers, it said.

Mr Swan said other banks should follow NAB's lead, and consumers should shop around for the best available deal. "I think it lays down the gauntlet to all of the other banks to reduce their fees and charges."

The changes are expected to cost NAB about $110 million a year in revenue. It says it will not try to recoup the fees through other charges.

The Reserve Bank estimated that banks earned $1 billion from penalty charges last year  much of which flowed straight to its collective bottom line. Analysts expect as much as $500 million will be cut from the big four banks' profits in the coming year.

NAB is best placed to make changes on personal banking fees, given that it has one of the smallest retail customer bases among the big four lenders.

Choice said the latest changes meant that over the past three months about $850 million in fee cuts had been promised to bank customers.