Cut your bank charges your­self

Here’s how to get max­i­mum ben­e­fit from your credit card

Finweek English Edition - - Openers - VIC DE KLERK vicd@fin­

“AND TO HELL WITH YOU TOO” should be ev­ery­one’s at­ti­tude to South Africa’s banks that charge ex­ces­sive fees. And it’s so much nicer when you re­alise that by just tak­ing a bit of trou­ble you can cut your bank charges quite sig­nif­i­cantly. The last bonus: use your credit card care­fully and ex­ploit the fact that no in­ter­est is charged on out­stand­ing bal­ances of less than 45 to 55 days and not only will bank charges dis­ap­pear but you’ll even be able to make a net profit from your bank.

For those in­di­vid­u­als suf­fer­ing from ridicu­lous bank charges, a few lessons. Bury your ego: banks ex­ploit it. Fancy credit cards, such as plat­inum, cost more than or­di­nary cards and don’t of­fer much more. To the so-called private clients who have the ad­van­tage of be­ing able to phone their own private banker at any time of the day or night, you’re just a Flash Harry and your bank is fully en­ti­tled to ex­ploit you. Those with big egos needn’t read fur­ther.

Use your credit card rather than your bank ac­count to save charges. In its credit card ad­ver­tise­ment, FNB says: “Re­mem­ber that with a credit card you do not pay trans­ac­tion fees on lo­cal pur­chases. Which makes ev­ery trans­ac­tion free.”

That’s true. I quickly did a com­par­i­son of my credit card ac­count and my cur­rent ac­count at FNB. On my credit card, there are no charges. Even on toll road charges of as lit­tle as R3,30 there’s no charge. Don’t use your petrol card for toll-road charges. There are charges on it.

I see my monthly pay­ment to Mul­tiChoice for the plea­sure of TV is deb­ited to my credit card ev­ery month. No charge. Vo­da­com’s huge ac­count is also shown. Once again, no charge.

How­ever, my cheque ac­count doesn’t look so good. Charges for the past month were just un­der R200 – and there was no in­ter­est on an over­draft ac­count. In­cluded in the bank charges are also the charges for a few debit or­ders: some of them my own, some from the bank’s side. The pay­ment of just more than R2 000 to Dis­cov­ery for our med­i­cal aid con­tri­bu­tion at­tracted bank charges of R12. If I move the debit or­der to my credit card, it’s free.

The one that shocked me most is a monthly pay­ment of R97,55 to Mo­men­tum. That’s the pre­mium on a pol­icy at Mo­men­tum the bank in­sisted I had to take out years ago to cover my over­draft at the time. The bank charges for that de­duc­tion of R97,55 a hefty R12 – al­most 13% of the amount paid. The pol­icy has been run­ning for more than 20 years.

There are a few sim­i­lar charges on my bank state­ment, in­clud­ing a pay­ment to San­tam for mo­tor ve­hi­cle in­sur­ance. It’s easy to re­duce those charges: move all those pay­ments to your credit card.

Us­ing the In­ter­net I can see the his­tory of my bank state­ment for sev­eral months. My bank man­ager, with di­rect ac­cess to years of my fi­nan­cial his­tory, must surely also have ac­cess to it. I won­der why she’s never taken the trou­ble to check through my bank state­ment and given me a call with a few tips on how to re­duce my bank charges. I must re­mem­ber that lack of in­ter­est.

The sec­ond – and also very ef­fec­tive – way of get­ting some­thing back from your bank is to make use of the fact your credit card only charges in­ter­est from 45 to 55 days af­ter you bought some­thing.

It works like this: say you buy food and cloth­ing to the value of R5 000 on 1 Septem­ber at a few shops. Those trans­ac­tions will ap­pear on your credit card state­ment im­medi- ately but the bank only charges in­ter­est 45 to 55 days later, de­pend­ing on which credit card it is and its sta­tus. So you should wait un­til 15 Novem­ber be­fore pay­ing for the items bought on 1 Septem­ber.

That means you have R5 000 avail­able for 45 days to pay your mort­gage. That’s rolled over ev­ery month and means R5 000 of free credit for the whole year.

Fi­nal hint: Keep your ac­cess bond in force and use it rather than an over­draft ac­count. Here you can even go one step fur­ther. Ap­ply for a mort­gage through a mort­gage orig­i­na­tor. Mort­gage orig­i­na­tors get up to 2% com­mis­sion from the bank and are pre­pared to share it. Half is al­most enough to cover the charges to reg­is­ter the mort­gage.

For ex­am­ple, a R100 000 ac­cess bond com­pares with an or­di­nary over­draft ac­count as fol­lows. The in­ter­est rate on the mort­gage could be 1,5% less than prime. On an over­draft it’s usu­ally 1,5% more. That 3% sav­ing could be R3 000/year. The sec­ond ad­van­tage is that the ac­cess fa­cil­ity isn’t re­viewed ev­ery year. Once it’s there, you have it for 10 or 20 years with­out fur­ther charges.

Not so with an over­draft. The branch man­agers of the com­mer­cial banks – it’s dif­fi­cult still to ac­cord them that sta­tus, but let’s say no more about that – send you a lit­tle let­ter ev­ery year telling you the bank has re­viewed your over­draft sta­tus and will grant it again. And for your con­ve­nience the re­view­ing charges – be­tween 0,5% and 1% (which it usu­ally is) of the value of the fa­cil­ity – has al­ready been deb­ited to your ac­count. It’s only R1 000.

Not so with the ac­cess bond. Once you have it, it’s dif­fi­cult for the bank to can­cel it if you use it re­spon­si­bly and there are never any ad­min­is­tra­tion or bank charges.

I use my ac­cess bond reg­u­larly, in and out be­tween the ac­cess bond and the credit card a few times a month, and so far there have been no charges. That’s what I like.

To con­clude: For­get about all the gim­micks they of­fer. I just want my charges kept down. I’m not pre­pared to con­trib­ute to their non-in­ter­est in­come that in­creases so hand­somely ev­ery year.

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