The financial regulator issued the warning around mortgage offset accounts, which are marketed to borrowers as a way to whittle down mortgages and cut interest payments.
But the Australian Securities and Investment Commission said thousands of customers may not yet realise they were denied their promised savings.
With almost $350 billion held in offset accounts as of March, a 28 per cent increase on two years earlier, consumers are eager to take banks up on the offer.
Banks paid $55 million in customer compensation for offset account failures in the two years to August 2025, a report from the watchdog released on Wednesday said.
The regulator is instructing every borrower to ring their bank to check.
"Customers shouldn't have to do this, customers should be able to rely on banks doing it for them," commission chair Sarah Court told reporters on Wednesday.
"But we're encouraging people to have a look ... while it is irritating to spend hours on the phone to your bank, we think it is worth it."
The report found banks could not readily identify whether a customer had requested an offset account in the first place and in some cases failed to link them to a customer's home loan.
In one case, a customer paid $3500 in higher interest payments in one month because their offset account was not linked to their loan.
ASIC's report assessed more than 200,000 accounts with eight banks.
The relatively small losses identified by the watchdog did not match the complaint volume about banks mismanaging customers' accounts, comparison website Canstar said.
Given the discrepancy, and a relatively low level of compensation paid so far, Canstar data insights director Sally Tindall saw warning sings of an avalanche once customers took the time to check their finances.
"Have a look in your banking app ... if it's not clear, call your bank and get them to confirm your offset account is properly linked," Ms Tindall told AAP.
Offset accounts are also a particularly attractive target for scammers because of the vast sums of money Australians collectively keep in them, Ms Tindall said.
"Keep all your banking details incredibly safe, particularly if you've got large amounts in your offset account," she said.
"Setting up things like real-time notifications in your banking app to make sure any time a single dollar leaves your offset account, you know about it."
Both Ms Court and Ms Tindall said the report was concerning, but conceded banks had taken steps to improve automation on updating records and contacting customers about account status.
Australian Banking Association chief executive Simon Birmingham downplayed the issue, saying that in more than 99 per cent of cases, banks were found to have managed offset accounts correctly.
"Banks take any identified issues very seriously, with these banks already compensating their customers and taking steps to further strengthen their offset account practices," he said.
5°C