As an Australian consumer, you may have heard the term ‘loyalty tax’ being thrown around. But what exactly is loyalty tax and are you paying it?
Loyalty tax refers to the extra fees or charges that long term customers may pay for the same product or service compared to new customers. It’s a way for companies to reward new customers with discounted prices or better offers while charging loyal customers more.
In Australia, loyalty tax can be found in a variety of industries including:
- insurance, and
For example, in the finance industry a lender may offer a discounted rate for new customers signing up for a mortgage with existing customers still being charged a higher rate for the same type of loan.
While companies argue that loyalty tax is a way to reward new customers and incentivise people to switch providers, it’s often seen as a way to take advantage of loyal customers who may not be aware that they’re being charged more.
So how can you tell if you’re paying loyalty tax?
The first step is to review your bills or statements and compare them to the current rates being offered to new customers. If you’re paying more for the same product or service, it’s likely that you’re being charged loyalty tax.
For your home loans and investment funding, another way to avoid loyalty tax is to allow us as your finance specialist to regularly compare offers and deals from different lending institutions. We can help identify if you’re being charged more than what new customers are being charged. It is usually good practice for us to perform a health check on your home and investment loans every 12 months – especially if your personal or financial circumstances have changed.
Let us do the negotiations for your home loan
Another service we often provide is to negotiate with your current lender on your behalf. If you have been a long term customer, we may be able to negotiate a better offer for you that’s comparable to what new customers are being offered. If they don’t come to the party then we can compare your current loan(s) with the many other lending providers we have access to. Some of our lenders have products not available to the general public so it is wise to use our services.
The Australian Competition and Consumer Commission (ACCC) has been cracking down on loyalty tax in recent years. In 2019, the ACCC launched an inquiry into the energy market and found that loyalty tax was widespread with loyal customers paying on average 10-25% more than new customers.
The ACCC has since made a number of recommendations
to help consumers avoid loyalty tax. These include increasing transparency around pricing and discounts and providing more information to customers about their options.
Loyalty tax is a real issue for many Australian consumers. It’s important to be aware of it and take steps to avoid paying more than you need to. This includes regularly reviewing your bills, shopping around, negotiating with your current provider and keeping up to date with any regulatory changes or recommendations made by the ACCC. By doing so, you can potentially save yourself money and ensure that you’re getting the most suitable offer possible.
Feel free to reach out if you have not had a loan review for more than 12 months and we will confirm if you are paying loyalty tax or not.