The cost of banking is an issue that rubs most people up the wrong way. It's right up there with bad drivers and poor customer service. But it's not that difficult to reduce your bank charges; you can do so by adopting good transaction habits.
The first good habit you should adopt is to use your own bank's ATMs instead of those of another bank. When you transact via another bank's ATM, you are effectively using two banks to perform one transaction. As a result, your bank charges you a transaction fee and the bank whose ATM you use charges you an inter-bank fee. This appears on your statement as a Saswitch fee, which could be as high as R25. So, if you use another bank's ATM three times in one month, you could end up paying Saswitch fees of R75 that you could have avoided.
Go electronic
Another good habit you should adopt is to bank via electronic channels, while keeping over-the-counter transactions to an absolute minimum. You can transact electronically via an ATM, the internet, a cellphone and a telephone.
The banks are "subtly" encouraging you to go electronic by hiking the costs of over-the-counter transactions while reducing the costs of electronic transactions.
For example, if you withdraw money over the counter, you could pay R16 plus 95 cents for every R100 you withdraw, as opposed to paying R3 plus 95 cents for every R100 you withdraw from an ATM.
You will also save on charges by withdrawing a large amount of cash once a week instead of withdrawing smaller amounts throughout the week. The fees for four small withdrawals a week will be more than the fee for one withdrawal a week.
Better still, avoid the cost of cash withdrawals by paying for goods and services with your debit or cheque card. You could pay as little as a capped fee of R12.50 for a point-of-sale purchase using your debit or cheque card. These card payment options are cheaper than cash withdrawals, and, depending on the banking package you choose, you may not be charged any fees if you pay for goods and services using a debit or cheque card.
If you have a petrol card, transfer the money you have budgeted for your monthly fuel expenses into your petrol card at the end of each month and use your card when purchasing petrol.
You could pay R3.25 per transaction on your petrol card, compared with R3 plus 95 cents for every R100 you withdraw from an ATM.
If use of your petrol card is not included in your banking package, you will have to pay an annual fee for the petrol card, but the fee may be worth the savings you can effect.
If someone has to pay you money, ask him or her to transfer the funds directly into your account electronically rather than giving you cash or a cheque. In this way, you will avoid paying cash deposit fees.
Furthermore, cheques can take up to 10 working days to clear, while the longest you will have to wait for an electronic transfer to clear is three days if the person who pays you does not bank at the same bank as you. If he or she banks at the same bank as you, the transfer is immediate, provided it is made during working hours.
Penalty fees and interest
Make sure you have sufficient funds in your account so that your transaction is not declined when you use your debit or cheque card to pay for goods and services. Not only is this embarrassing but it also attracts a penalty fee. Although this fee may be as low as R2, these "little" fees can add up.
If you try to withdraw more money than is available in your account, the bank will decline the transaction and charge you a penalty fee of up to R2.
On the same note, make sure you budget each month to ensure there are sufficient funds in your account to meet all your debit orders and stop orders. Your bank will charge you a penalty fee of as much as R100 if a stop order or debit order is returned due to insufficient funds.
Make sure there is enough money in your current, or cheque, account for your cheques to be honoured, because the bank will charge you another penalty fee of R100 if a cheque bounces.
However, to really save on fees, you should avoid using cheques altogether, because your bank will charge you a fee for each cheque you issue. Electronic transfers, on the other hand, are either much cheaper or free, depending on your bank and your account package. For example, you can pay a set fee to perform unlimited electronic transactions, compared with paying as much as R45 for a cheque you issue.
If you have to make a large payment to a service provider each month, avoid doing so by debit order if you can and instead pay by electronic transfer, because a debit order can cost you as much as R28, depending on the payment amount.
You should always stay within your overdraft limit, because you are charged penalty fees of as much as R40 a month on any amount that exceeds your overdraft limit.
Overdraft interest rates are determined according to your personal credit profile and could range from the prime interest rate of 15 percent to as much as prime plus six percent (21 percent).
Managing credit
Ideally, you should settle the full balance on your credit card each month to avoid being charged interest.
However, if you make only the minimum repayment each month, make sure you do so by the due date; if you do not, you will be charged a late payment fee, which could be as much as R110.
Ensure you do not exceed your allocated credit limit, otherwise you will incur "over the limit" charges, which could be as much as R165.
Banking packages
It is important that you choose a bank account that best suits your transaction needs and that will not result in your paying high fees (see "How to choose a bank account", published on April 19).
For example, using a savings account as a transaction account could result in your paying high bank fees (depending on the number of transactions you make).
The major banks offer different account packages with discounted fees on products within the package - for example, a cheque account at a set monthly fee with a credit card that attracts no annual fee.
Usually, these packages involve a fixed fee for a bundle of transactions on the cheque account and its debit card. If you exceed the number of transactions included in the bundle, you pay per transaction.
If you don't choose one of these packages, there are three fee-payment options for cheque accounts:
- A fixed fee for a bundle of transactions;
- Pay-as-you-transact; or
- Pay-as-you-transact but obtain a full or partial rebate against the total fee based on the balance you maintain in your account.
The way to choose the most appropriate option is to identify your "user profile". You need to monitor your monthly transactions to find out the type of transactions you typically perform, as well as the number of these transactions - for example, balance inquiries, withdrawals, debit orders, stop orders, deposits and transfers.
Some banks have their own banking fee calculators and you can compare the fees you will pay on similar accounts across the banks at www.bankmonitor.co.za
You should also note that some banks restrict their packages to people who fall within certain income groups. For example, you have to earn between R10 000 and R25 000 a month to be eligible for Absa's Gold current account package.
The Gold package entitles you to a debit card, a credit card with no monthly card fees, an interest-free overdraft up to R1 000 and life cover of R15 000, which is paid directly into your account if you are still an accountholder when you die.
With the Gold package, you will pay a monthly fee of R139 to perform 35 transactions a month using any electronic channel.
The 35 transactions can include any of the following: cash withdrawals at an Absa ATM; up to two cash deposits at an Absa ATM; balance inquiries and mini-statements from an Absa ATM; fund transfers; account payments; airtime top-ups; debit orders; and stop orders. Your monthly fee also includes your overdraft ledger fee. You do not pay a subscription fee for internet, cellphone or telephone banking.
You will, however, be charged R10 a transaction once you exceed the 35 transactions.
Most banks offer you reduced fees if you agree to transact only electronically. For example, if you choose the fixed-fee option on Standard Bank's Achiever Go package, you will pay R50 a month for 10 electronic transactions, four Autobank cash withdrawals and one Autobank cash deposit. However, Achiever Go is restricted to clients who are between 18 and 26 years of age.
Other tips
If your debit or credit card is faulty or is retained by an ATM, the bank will replace it at no charge. However, if you lose your debit or credit cards, your bank will charge you a replacement fee, which ranges from R29 at Standard Bank to R49 at First National Bank.
If you receive foreign bank cheques that you need to cash, the bank will charge you a fee for processing a cheque from an international bank.
However, you can arrange for foreign currency to be transferred directly into your bank account if you use an inward telegraphic transfer service. The fees are lower than if you use a foreign bank cheque and you receive a better exchange rate, according to the Standard Bank website.