All financial products are not the same and choosing the right one can result in substantial savings, writes Zoe Fielding.

You've heard it before and you'll hear it again: always shop around for financial products. The results of this year's Blue Ribbon Awards, bestowed by sister publication AFR Smart Investor along with researcher InfoChoice, confirm this advice.

In the lending and credit card categories, only a handful of the winning products were provided by major banks. Smaller players, such as regional lenders, building societies and credit unions, dominated in several areas with products that are simple, easy to understand and cost-effective. <2h>Home loans The smaller participants are challenging the big four banks' traditional dominance of the home loan market, offering competitive interest rates on well-designed products. The average standard variable rate offered by the big four banks is 7.38 per cent, compared with 7.17 per cent at credit unions and building societies and 6.9 per cent at other non-bank lenders. Over 25 years, a home mortgage charging 7.38 per cent will cost $358,083 in interest compared with a loan charging 6.9 per cent, which will cost $330,371 in interest. That's a massive difference of $27,712, well worth the few phone calls or meetings it might take to find a better deal.

The cheapest option in home loans is the basic loan. Greater Building Society's Great Rate Home Loan was judged to be the best of this type on the market, scoring well for its rates, fees and features. In addition to a low rate, the product offers free redraw, flexible repayment options, no monthly fees, the opportunity to make extra repayments and a split-loan option.

Greater's average variable rate was 5.75 per cent over the 12 months to June 30. Its rate at the moment is 6.69 per cent and there are no monthly fees. Finalists in that category were MECU and Reduce Home Loans.

While basic loans are the cheapest, variable-rate loans are the most popular. Australia's largest credit union, CUA, was judged the best provider in this category with its one-year introductory variable-rate loan. In April, the credit union lowered its standard variable rate by 0.25 percentage points at a time when other providers were lifting their rates.

The catch with a CUA home loan is that they're only open to people who are members, although membership simply involves buying a $10 share in the credit union, which is hardly an onerous condition to get access to a mortgage that costs an average of 0.5 percentage points less than those offered by the big banks. The loans come with free redraw and a 100 per cent offset account and there are no monthly fees.

BankWest and Greater Building Society were finalists in this category.

For those preferring certainty of repayments, a fixed-rate loan might be a better option.

Newcomer Better Option Home Loans beat finalists Greater Building Society and HSBC to win the fixed-rate home loan category. Entering the Australian market in 2007, Better Option Home Loans focuses on minimising interest rates and fees. Its rates are highly competitive on one-, two-, three-, four- and five-year fixed-rate loans. Loan amounts usually range from $300,000 to $500,000, with a minimum of $250,000. Application fees are waived but a $1500 exit fee applies if borrowers leave within the first four years.

Premium home loans

The big banks tend to do better with their premium mortgage products than the smaller providers. ANZ was the winner of the Blue Ribbon Award in the premium banking package category for its ANZ Breakfree Home Loan Package, while NAB and Newcastle Permanent Building Society were runners-up.

ANZ's package charges an annual fee of $375, which includes up to five home loans free of loan approval and administration fees, a gold credit card (with comprehensive travel insurance), valuation fees, discounted insurance products, extra interest of 0.3 percentage points on savings accounts, a 0.35 percentage point discount on margin loans and half a percentage point discount on personal loan interest rates.

Loans between $150,000 and $250,000 qualify for a 50-basis-point discount on the rate; above that there's a 70-basis-point cut. Lines of credit over $250,000 get a discount of 60 basis points.

To qualify for the package, you need three accounts: a home loan of at least $150,000, a credit card and a transaction account.

The line-of-loan category was hotly contested. National Australia Bank's Portfolio Facility was judged to be the best, closely followed by finalists Bank of Queensland and Newcastle Permanent Building Society.

NAB's Portfolio Facility offers consolidated reporting and helps customers manage wealth creation across as many as 12 sub-accounts. They can mix and match interest-only loans and fixed rates and split borrowings and savings to optimise cash flow and tax.

Customers can use the equity in their home to make other investments through the same product package. The facility offers a 0.7 percentage point discount on NAB's standard variable loan. Its annual fee is $550 but there are no other establishment or monthly service fees. The minimum loan is $250,000.

Credit cards

Fully featured cards are back in vogue. Last year, with the financial downturn continuing to bite, the focus was on low rates and paying down debt as quickly as possible. People, once again, are prepared to consider cards that offer loyalty points and other features that over the past few years were cast off as non-essentials.

The AFR Smart Investor Blue Ribbon Awards deemed Westpac's Altitude Platinum card as the best fully featured product. The Commonwealth Bank Platinum credit card and American Express's Platinum credit card were finalists.

Fully featured cards were compared based on the total spend required for a $100 shopping voucher and the impact of fees and interest rates. The least spending required to earn $100 worth of shopping was on CBA's Platinum card ($5680) but Westpac ($5862 spend for the $100 voucher) was judged to have a superior overall rewards package.

The Westpac Altitude product offers a dual card, with account-holders having an American Express card twinned with either a MasterCard or Visa Platinum card. Typically, the Amex card delivers more points towards free flights, while the MasterCard or Visa card is more widely accepted in stores. Low-cost cards will, of course, always hold appeal, as will those that offer attractive balance-transfer deals.

For the second year in a row, MECU took the award for the best low-rate card. The criterion InfoChoice considered in this category was that the interest rate had to be below 14 per cent on average over 12 months. MECU's rate averaged 9.5 per cent over the 12 months.

Finalist Sydney Credit Union's Low-Rate Visa credit card had an average rate of 10.64 per cent, while fellow finalist ME Bank's Members Equity MasterCard averaged 11.16 per cent. The current rate of 10.49 per cent also applies to cash advances.

The winner in the balance-transfer category was BankWest's Zero MasterCard. To judge this award, InfoChoice assumed $3000 of debt was transferred to the card, with $150 a month being repaid. Including rates and fees, it would take one year and 10 months to repay the BankWest card, at a total cost (on top of the $3000 debt) of $198.

Fellow finalists Suncorp's Clear Options Standard card and the HSBC credit card had the same repayment term but at a cost of $212 and $256, respectively.

Sourced from SMH

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