Don’t bank on better value from fees

You may well be paying more this year to do banking, even if your bank has not increased its charges on your bundled account. That’s because the bank may have cut back on what it offers in the bundle. Angelique Ardé reports

If you pay bank fees at a fixed monthly rate, rather than on a feeper-transaction basis, you need to find out exactly what your fixed rate includes. In other words, how many transactions and what type of transactions are covered by your fixed monthly fee?

Three of the “big four” banks – Absa, Nedbank and Standard Bank – have implemented their new fee structures for 2015. (First National Bank, or FNB, announces its fee increases at the end of June, its financial year-end.)

Standard Bank has, on one of its accounts, kept the monthly fee the same, but reduced the number of transactions covered. The bank’s Prestige Plus customers will continue to pay R179 a month, but the fee includes eight cash withdrawals at the bank’s ATMs, instead of 12. Meanwhile, Standard Bank’s Elite customers will be charged a fixed fee of R95 a month – down from R104 a month – but the fee no longer includes the Gold credit card annual fee of R28 a month. This means Elite customers with a Gold credit card will pay fees of R123 a month in total.

Fixed fees apply to “bundled” accounts. On these accounts you typically pay a fixed monthly fee for a specific bundle of products, including a cheque card, overdraft facility and credit card, as well as a bundle of transactions. Once you exceed the number of transactions included in the bundle, you pay per transaction.

Many consumers opt for a fixed monthly fee because it’s easier than having to work out how much it will cost you to do your banking on a pay-as-you-transact basis. This is especially true when it comes to withdrawing cash from an ATM when a formula based on the amount you withdraw applies, rather than a flat fee.

For example, if you’re an Absa customer with a Gold or Platinum current account and you’re on the pay-as-you-transact option, you pay R3.95 plus R1.30 per R100 withdrawn from an Absa ATM. So, it will cost you R10.45 to draw R500.

Capitec, which is not one of the “big four” and does not offer bundled accounts, charges its customers a flat fee of R4.60 to draw cash from its ATMs, regardless of how much you draw. Capitec customers pay even less – R1.05 – if they draw cash from till points at certain stores.

It’s generally more costly to bank on a pay-as-you-transact basis, according to the Bank Charges Report for 2014 by Solidarity Research Institute (SRI). The SRI does an annual comparative analysis of the cost of personal transaction accounts at five South African banks: Absa, Capitec, FNB, Nedbank and Standard Bank.

Pay- as- you- transact accounts are suitable for people who perform a very limited number of transactions – usually less than 10 a month, Solidarity has found.

The SRI study is based on user profiles, defined by the number of transactions you make in a month, not on your income. Typically, as your income increases, there will be an increase in the number of transactions you make.

Understanding your user profile is important in determining whether or not your bank account suits your needs and whether you could be getting better value with a different account.

To establish your user profile, examine your last three bank statements and tally up the number and types of transactions you do on average in a month – from cash withdrawals, debit orders and debit card purchases to internet banking payments and inter-account transfers. Check if you’re incurring needless costs, such as paying for an overdraft facility you don’t use.

Absa, Nedbank and Standard Bank customers will have received notification of the price changes late last year. In previous years, you would have receives a comprehensive guide, detailing the fee structures applicable to all accounts offered by your bank – from those aimed at students to those aimed at seniors, and every type of account in between. But the three banks that have recently announced new fees have given customers details relating to their accounts only. So if you want to compare the fees on other accounts offered by your bank, you’ll have to visit the bank’s website for the information.

If you’re in the high end of the middle-income bracket and require an overdraft and credit card, and you do a large number of transactions in a month, the accounts aimed at you are Absa’s Platinum Value Bundle, FNB’s Platinum Cheque Bundle, Nedbank’s Savvy Bundle and Standard Bank’s Prestige Plus.

The three banks have not increased the monthly fee on these accounts this year, but their offerings have changed slightly.

HOW TO COMPARE

When comparing accounts, you need to look at price and features. Absa’s Platinum Value Bundle costs R149 a month, Nedbank’s Savvy Bundle R169 a month, Standard Bank’s Prestige Plus R179 a month and FNB’s Platinum Cheque Bundle R199 a month.

The table on the right shows the main features of bundled accounts for higher middle-market earners. However, the banks’ offerings also differ in other respects. For example, Absa offers its value bundle customers a rebate on charges on products such as vehicle finance and spouses’ accounts. And Nedbank’s Savvy Bundle fee includes a subscription to its rewards programme, but Standard Bank’s Prestige Plus doesn’t.

Nedbank’s fee schedule is the most comprehensive of the three banks applying the new fee structures. The schedules provided by Absa and Standard Bank show only the transactions that are included in the monthly fee, but Nedbank’s lists the transactions that are excluded and that attract fees.

Moira Sharp, the product specialist manager of price and analytics at Nedbank, says there have been no changes to Nedbank’s Savvy Bundle Account, which is “a true all-in-one” bundle of products – a cheque account with access to both a credit card and overdraft facility at no extra cost.

Arrie Rautenbach, the chief executive of Barclays Africa Retail Banking, says that the fee increase for Absa customers who have not yet migrated to a “relevant value bundle option” will be about six percent from January 1. He says that all the bank’s value bundles offer incentives, especially to Absa customers who use the bank for all their banking.

Sugendhree Reddy, the head of personal banking at Standard Bank, says Standard Bank has “kept to a minimum” the price increases on personal transactional accounts. Growing numbers of customers have migrated to self-service banking channels and mobile payment offerings, resulting in significant cost savings for customers.