If you’re paying bank charges on a pay-as-you-transact (PAYT) basis, it could be costing you more than if you chose a “bundled” account. The PAYT accounts offered by the big banks are more expensive than their bundle-type equivalents, according to the latest report on bank charges by trade union Solidarity.
“PAYT accounts are therefore suitable only for people who perform a very limited number of transactions each month,” this year’s Solidarity report states.
Even the accounts that are aimed at low-income earners – and these accounts are usually available only on a PAYT basis – are more costly than the cheapest bundle-type accounts, the report says.
Paul Joubert, a senior researcher at the Solidarity Research Institute, says the relatively high cost of PAYT accounts is leaving many consumers with little option but to move to bundle-type accounts.
“Bundled” accounts are characterised by a fixed monthly fee – between R80 and R150 – in exchange for a limited or an unlimited number of transactions.
Typically, the bundle includes a credit card and access to an overdraft facility.
Over the past few years, the “Big Four” – Absa, First National Bank (FNB), Nedbank and Standard Bank – have been increasingly marketing these accounts, the report says.
Solidarity’s report is based on four profiles of bank customers who perform 12, 17, 24 and 29 transactions a month respectively. In summary, the cheapest account is based on the average cost across all four customer profiles.
Based on its research, Solidarity found that the top-ranking – in other words, the least expensive – bundled account is Absa’s Silver Value Bundle, which costs R79 a month. It is followed by FNB’s Smart Cheque Limited (R84 a month), Nedbank’s Savvy current account (R89 a month) and Standard Bank’s Elite Plus account (R99 a month).
The Solidarity report notes that the cost of an ordinary current account has remained stable since last year, “but there is no indication that it will decrease”.
The “Big Four” have few options if you want to pay charges of less than R80 a month, it says.
“Only FNB’s Smart Unlimited account and the Fee Saver option on the Smart Cheque, Gold Cheque and Platinum Cheque accounts offer the possibility to pay less than R80 a month for someone who performs as few as 12 basic transactions a month,” the report says.
Capitec’s Global One account is “a considerably cheaper alternative for many people”, although the bank does not offer an overdraft facility or a credit card.
A number of the accounts that the “Big Four” offer to the lowest segment of the market “also provide a cheaper alternative, but almost all of these accounts have specific disadvantages that, in spite of the lower cost, will make them unattractive for many bank clients”.
Joubert says that when Capitec does launch its much-awaited credit card, possibly this year, it will “broaden Capitec’s appeal, especially among people at high income levels”.
Capitec has just one account, the Global One account, which is available on a PAYT basis only, but the transaction fees are low compared with its competitors. For example, you pay an administration fee of R4.50 a month, R1 to draw cash from tills at Pick n Pay, Shoprite, Checkers or Boxer, R4.30 to draw from a Capitec ATM and R7 from other banks’ ATMs, and there is no fee for using your card for debit purchases.
In Solidarity’s comparison of the big banks’ middle-market accounts, Capitec again came out tops for the fourth year in a row (the Solidarity report is four years old). It was followed by FNB, Absa, Nedbank and Standard Bank. Last year, FNB took second place, followed by Standard Bank, Absa and Nedbank.
Bank charges did not change significantly over the past year, the report shows.
There was a marginal increase in the cost of withdrawals at ATMs and the cost of cash and cheque deposits increased across the board. These changes had a negligible impact on the cost comparisons.
However, Standard Bank’s decision to close its Achiever Electronic account – the bank’s “most competitive mainstream account” – to new clients weakened the bank’s performance in this year’s comparison.
Last year, Standard Bank was rated third in the survey, thanks to the Achiever Electronic account. Because Standard Bank’s Elite Plus account is now its cheapest “mainstream account”, the bank fell into last place this year. On average, the Elite Plus account costs almost 30 percent more than the Achiever Electronic account.
Kershia Singh, media liaison for Standard Bank, says the Achiever Electronic account was replaced by the Access Account Plus account, “which offers better value by way of funeral benefits”. This decision was in keeping with the bank’s streamlining of its product offering, she says.
The average cost of a Capitec account decreased slightly by 0.5 percent over the past year as a result of a three-cent decrease in the cost of SMS notifications. “The bank is still ranked the cheapest in this comparison, even though the interest of 4.25 percent to five percent it pays on a running balance was left out of the calculation,” the report says.
The cost of FNB’s Smart Unlimited account remained unchanged, with its average monthly cost of R53.20, the report says. “This amount differs from the ‘fixed’ monthly fee of R49 that is advertised, because of the additional cost of SMS notifications to beneficiaries to whom money is transferred.”
The same applies to Absa and Standard Bank.
Watch out for the cost to you of sending an SMS notification when you pay beneficiaries. These SMSes are not free on Absa’s Silver Value Bundle or on Standard’s Elite Plus account.
Also watch out for the fees for withdrawing cash from the ATMs of banks other than your own.
When comparing the cost of withdrawals from other banks’ ATMs, Capitec beats the other banks “hands down”, with a fixed fee of R7.
Capitec is followed by FNB, which has a somewhat more complicated, and higher, fee structure. However, FNB is the only bank that imposes a limit on this fee. “A few years ago, FNB had one of the highest fees for withdrawals at other banks’ ATMs, but this situation has been reversed,” the report says.
Standard Bank, Absa and Nedbank do not have a limit on their fees for withdrawals from another bank’s ATM.
HOW TO SAVE ON BANK CHARGES
There are some simple ways to cut down your bank charges. Paul Joubert, a senior researcher at the Solidarity Research Institute, offers the following tips:
* Know your banking habits. If you don’t know off the top of your head how many debit orders you have, or how many cash withdrawals you make in a month, analyse your past few bank statements. Understanding your banking habits is the key to knowing what kind of account you should have.
* Know which exact account you have and compare it with the other accounts on offer at your bank. “You might be able to save on bank charges by switching to an account that could be more suitable or cost-effective.” Joubert says that when he speaks to consumers, many don’t realise that their bank offers different types of current accounts, let alone all of the features of their existing account.
* Avoid using the ATMs of other banks. It will cost you dearly, “unless you’re a Capitec client – in which case you pay a flat fee of R7 irrespective of the amount that you withdraw”, Joubert says.
* Avoid using cheques. “This is worth emphasising, because some banks are loading the cost of using cheques to dissuade consumers from using them, in favour of digital channels,” Joubert says.
* Avoid making over-the-counter deposits. On an Absa current account, for example, an over-the-counter deposit of R100 will cost you R7.20 (R5.95 plus R1.25 per R100).
Joubert says that if you need to deposit cash, either do so at an ATM or consider opening a low-cost account that charges relatively low fixed fees for cash deposits.
“FNB’s EasyAccount (which charges a flat fee of R4 a cash deposit at EasyPlan branches) and Nedbank’s Ke Yona (flat fee of R5.50 at Nedbank ATMs) might be good options,” he says.