Bank fees charged to households fell last year for the first time in the history of an annual Reserve Bank study that goes back to 1997.

The amount of fees households paid to banks fell 16 per cent last year to $4.2 billion.

That was the lowest level of fee income from Australian households that the banks had collected since 2006.

The Australian Bankers' Association's chief executive Steve Munchenberg says its a significant drop.

"What the data that's been released today shows is that the amount that households are paying in banking fees has fallen quite dramatically," he told ABC News.

"The amount that people pay each week has fallen... more than two dollars on average."

The removal of many 'exception fees' - penalties charged for breaching account conditions, such as overdrawing an account - was the biggest contributor to the decline in fees.

Exception fees on household deposit accounts fell a total of $395 million, or 57 per cent, in 2010, similar fees on credit cards also fell by $220 million.

The Reserve Bank says ATM reforms instituted in March 2009 have led to more transactions being performed at ATMs owned by the customer's bank, and therefore a fall in the amount of 'foreign' ATM fees charged.

Katrina Lee from consumer group Choice says the introduction of transferable account numbers would boost competition for deposits even more.

"Consumers should be able to switch banks easily to reward the banks that are willing to compete," she told ABC News Online.

"The level of risk or hassle that they perceive as being there should be removed. Also, I would make the point that a consumer, just by having the ability to switch, would force their current bank to compete to keep them."

The only category of household bank fees that did not fall was charges on home lending - the amount of mortgage fees collected rose 2 per cent, although that was a lot less than the average annual increase of 9 per cent over the previous five years.

Katrina Lee says removing mortgage exit fees would result in the same competition that has driven down deposit charges.

"We are certainly of the view that mortgage exit fees need to go," she said.

"We think banks should be competing on the products they are offering. We think that if they need to lock in their consumers to keep them they're not offering a competitive product."

Business slugged

However, the news is not so good for Australia's struggling business sector, which paid 13 per cent more fees in 2010 and covered the cost of fee reductions for households.

Businesses paid a total of $6.9 billion in fees to Australia's banks in 2010, despite a fall in the amount of outstanding debt in the business sector last year.

Most of the increase in bank fees from businesses came from a 25 per cent rise in various lending fee income.

One area of fee reduction that businesses shared with consumers was the reduction in deposit account exception fees, which declined 7 per cent.

The Reserve Bank says small businesses were the biggest beneficiary of this as they pay around 85 per cent of these sort of exception fees.