Cut your bank charges yourself
Here’s how to get maximum benefit from your credit card
“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.