Why your bank might be overcharging you interest – and how to check

OpinionMoney contributorAugust 1, 2026 — 5:01amHave you got an offset account, and if so, have you ever checked it’s working properly to reduce the interest paid on your home loan? Sounds like something most people would assume the bank knows how to get right, right?Well, according to a report by ASIC that was published this week, it’s now something we should all be worrying about, and checking on promptly.Banks are bad at catching their own mistakes, with 77 per cent of the failures banks eventually reported going undetected until ASIC forced the data from them.Ryan StuartThe Australian Securities and Investments Commission has reviewed the practices of eight banks, looking at more than 200,000 individual home loans to check whether the offset accounts in place were delivering the savings that were promised, and the commission has been unimpressed by the mess.Its report shows that, in the period from September 2023 to August 2025, banks paid out compensation of more than $55 million to customers for cases where offset accounts were not offsetting correctly – and that was chiefly only to people who discovered a problem and asked about it.Fifty-five million dollars in compensation is what banks have so far admitted to getting wrong – but ASIC says the real number could be a lot bigger. Several banks couldn’t even reliably tell them who had asked for an offset account in the first place, let alone who had lost money on one that hadn’t been set up or linked correctly, or even set up at all.An offset account is a transaction account linked to an eligible home loan that is designed to reduce the amount outstanding on the loan used to calculate interest. Offset accounts, when set up correctly and used well, can significantly decrease your interest costs over a lifetime. Even after a mortgage could be paid down outright, many Australians approaching retirement choose to keep their money in an offset account – rather than closing the loan down entirely – so they can have access to credit in their later years that might otherwise be difficult to get or even be inaccessible.According to the report, in March this year Australians held $349.1 billion in offset accounts, a number that grew by an enormous 28 per cent over the past two years.Yet, with this growth, there is clearly a job to be done in properly enabling these accounts and checking that they are doing what they’re supposed to do – because many are not.I sat down this week with the new chair of ASIC, Sarah Court, to unpack the problems with offset accounts on the Prime Time podcast. She broke the failures down by type.‘A number of the banks really struggled to identify when offset accounts had been requested in the first place.’Sarah Court, chair of ASIC“Of the significant failures we found, 55 per cent were cases where the bank had opened the offset account but not linked it to the home loan. In another 22 per cent or so, the offset account wasn’t opened in the first place. And in some other circumstances, the account was eventually linked, but not in the timeframe the customer was expecting.”The written report ASIC published this week, called “Offsets, out of mind”, goes further on the cause. It found that 86 per cent of failures came down to plain manual error, such as a staff member misreading an instruction, entering the wrong account number or missing a step when a loan was refinanced.It also found that banks are bad at catching their own mistakes: 77 per cent of the failures that banks eventually reported went undetected until ASIC forced the data out of them. One bank had a report specifically built to catch broken offset links that had sat unreviewed for almost five years.“We asked the banks: how can you guarantee that these accounts are all being linked?” Court says. “We were disappointed, I think it’s fair to say, with some of the responses we got. A number of the banks really struggled to identify when offset accounts had been requested in the first place.”The report singles out that offset accounts are frequently going wrong when a customer is refinancing and coming off a fixed rate. These are the moments when accounts most often come unstuck because many banks automatically delink an offset account when a loan changes and expect the customer to separately ask for it to be relinked.The most challenging reality of this problem is that it’s hard for people to see it and know that it’s not working. Most people set up their loan repayment amounts based on their minimum payment requirements. These are usually set by the loan amount, terms and interest rate, not by how much they have to pay when the offset balance is taken in.So the amount leaving your account each month doesn’t usually change when an offset account fails – making the failure almost impossible to notice.There’s no red flag on your statement, and no notification in your inbox. You have to go looking for whether your home loan and offset are in place and working together to know.“We were disappointed,” said Sarah Court, chair of the Australian Securities and Investments Commission.Edwina PicklesAnd going looking isn’t as easy as it should be. Half of the banks ASIC reviewed don’t even show their customers, in their app, how much interest their offset account has saved them. That information shows up only in a statement.“Sometimes it can be really hard for customers to even check whether their offset account has been linked,” Court says. “You have to do a bit of detective work. We’re very reliant on the banks doing the right thing behind the scenes.”Part of that comes down to the way in which many banks are run. Home loan teams and everyday transaction account teams often run on completely separate systems, with completely separate goals, KPIs and reporting. So, linking the two parts of the same bank can be a manual process, handled by people, with nothing automated to catch errors and issues.Yet while clunky systems might explain how the mistakes happen, they don’t explain what happened next. The report found that some banks investigated and compensated customers only after receiving complaints, with one bank telling ASIC it has no process to check routinely for errors “unless there is an associated customer complaint”.I asked Court directly whether it’s fair that consumers have to fight for something they already filled out the forms for. “I would be hoping there’d be very few, if any, scenarios where a customer is told their account has not been linked without the bank very promptly dealing with remediation,” she says.“We’re not seeing resistance to paying compensation. Where a bank has failed to deliver on its promise to a customer, it is completely incumbent on the bank to promptly remedy that.”ASIC named all eight banks reviewed – AMP, ANZ, CBA, Credit Union Australia, HSBC, ING, Macquarie and Westpac – but every case study in the report is anonymous, and Court would not attach specific failures to specific banks when I asked.“I think it’s fair to say some of them are performing better than others,” she says. “Having said that, if I look at the $55 million that’s been remediated, that is spread across a wide number of banks. So it is clear that across the board, all banks have some challenges.”So, should you worry? Court says it’s wise to be vigilant, which is regulator-speak for “don’t panic, but don’t assume you’re fine either”. And if that’s the case – how do you check?First, open your online banking app and look at your offset account and your home loan side by side. Check if the offset account is linked to that loan.Second, check it’s linked to the right loan, particularly if you’ve refinanced, switched products or come off a fixed rate at any point. Third, pull up a recent statement and see whether the interest you’ve been charged looks like it’s calculated on your loan balances minus your offset balances, not your full loan balance alone.If anything makes you feel concerned, call your bank. Ask them to confirm – in writing, by email or secure message – that the account is linked, has stayed linked, and is reducing your interest the way it’s supposed to.If the bank can’t or won’t give you a straight answer, and you’re worried that there’s an unsolved issue, you can report it directly to ASIC through its website to escalate things.Bec Wilson is author of the bestseller How to Have an Epic Retirement and the newly released Prime Time: 27 Lessons for the New Midlife. She writes a weekly newsletter at epicretirement.net and hosts the Prime Time podcast.Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.Bec Wilson is the author of How To Have An Epic Retirement and writes a weekly newsletter for pre- and post-retirees at epicretirement.net.From our partners