You always notice comparison rates following the real interest rates which are demonstrated in every bank website. But do you know how the comparison rate is calculated? In a nutshell, the rate is calculated based on particular figures including account opening fees, account management fees and account annual fee etc.
Take the St George bank for example:
When applying for Advantage Package product, clients actually should look into the comparison rate. For example, if the loan amount ranges from $150K to $250K, the real interest rate is 4.99%, but due to the annual fees $395, we can see the Comparison Rate is 5.38%.
However, please note that the package product normally includes offset account, also package product customer enjoys higher interest discount plus waiving annual credit card fees. These benefits are not reflected by Comparison Rate though. Therefore, the two rates are both useful for loan applicants’ consideration.