Money market accounts are ideal for shorter-term lump-sum investments because they offer a flexible savings vehicle at considerably higher interest rates than a normal savings account, but they do require fairly high minimum balances. Most money market accounts calculate their interest rates daily and are therefore not fixed. The daily rate is influenced by the liquidity in the market; the less money in circulation on the day the higher the rate and visa versa.
However, as the Mail & Guardian discovered, the offerings vary between banks for minimum balances, rates and fees.
Absa
Absa’s money market account has a minimum investment of R20 000. You can open the account with a R1 000 monthly debit order but you cannot access the funds until the balance reaches R20 000. If you want to withdraw before this period, your account will be closed unless you continue to have a debit order in place.
Rate: 6,64% on all balances of R20 000 or higher.
Fees: 0,4% on all deposits. No withdrawal fee at a branch or ATM. Normal telephonic and Internet banking fees apply for transfers.
Absa does not differentiate between a transactional and investment money market account and offers a high interest rate. The negative is that it charges a 0,4% deposit fee, unlike other banks. The main issue is that this fee is not disclosed by consultants. Through experience, I was aware of the fee and spoke to three consultants, including one at the investment call centre, and none mentioned the deposit fee until prompted. At the investment call centre the consultant was quick to mention there were no withdrawal fees at an ATM or branch, yet made no mention of the deposit fee. So be aware of the reduction in yield this has on the investment.
First National Bank
Like Absa, FNB only offers one money market account although it requires a lower minimum investment of R10 000. FNB does, however, offer transaction facilities on the account for an additional monthly fee.
Rates: R10 000 is 2,5%; R20 000 is 5%; R50 000 is 5%; and R100 000 to R1-million is 5,5%.
Fees: There are no fees unless you choose the transactional monthly account, which costs R26,50 a month.
Standard Bank
Standard Bank offers several money market accounts, depending on whether you want a savings account or a money market account that can be used as a transactional account.
The Money Market Call Account requires a deposit of R250 000 and a minimum balance of R100 000, and is aimed at larger investors. It is effectively a transactional account and is similar to the other banks’ offerings.
Money Market Call account
A minimum balance of R100 000.
Rates: R100 000 to R249 999 is 4,5%; R250 000 to R499 999 is 6,5%; and R500 000 to R1-million is 6,65%.
Fees: You can make minimum withdrawals or deposits of R5 000 and there are no fees to either deposit or withdraw.
MarketLink
MarketLink is for the smaller investor. Interest is earned from R5 000 and it has the flexibility of a transactional account.
Rates: R0 to R4 999 is 0%; R5 000 to R19 999 is 2%; R20 000 to R99 999 is 5%; R100 000 to R499 999 is 5,35%; and R500 000-plus is 5,5%.
Money Market Fund through Stanlib
The Money Market Fund offered through Stanlib is a unit trust fund and therefore should be compared to other unit trust companies’ offerings. The minimum investment is R25 000.
Rate: 6,68% on all amounts from R25 000.
Fees: There are no fees on initial lump-sum investments or withdrawals, however any additional investment (deposit) of less than R10 000 will be charged at 0,25% to discourage the use of the fund as a transactional account.
Unlike the other money market accounts investors have to give notice to receive the funds and will receive the payout in about 48 hours if investors bank with Standard Bank and in three to five days time if with other banks.
The various account offerings were not explained by the consultant, who only recommended the Stanlib Money Market Fund. When I contacted the bank again to find out about the transactional account, only the call account was mentioned and not the MarketLink product.
Nedbank
Nedbank offers two money market accounts. The first is a fully transactional account and attracts fees. There is no minimum balance to keep the account open but investors do not receive interest on balances lower than R20 000.
Money Market Investment account
Rates: Below R20 000, there is no interest; R20 000 to R49 999 is 4,74%; R50 000 to R199 999 is 4,84%; R200 000 to R749 999 is 5%; and R750 000-plus is 5,22%.
Fees: If you have a balance of R20 000 or more, the fees are substantially lower. For example, there is no monthly fee; transfers and debit orders are free. There are, however, charges for cash withdrawals and deposits.
Money 24 Investment account
This account was launched recently and is aimed at people who just want to save. There are no fees on this account and the minimum balance is R10 000.
You are able to deposit or withdraw R1 000 at a time without incurring fees.
Rates: R10 000 to R19 999 is 4%; R20 000 to R49 999 is 5,2%; R50 000 to R49 999 is 5,2%; R100 000 to R249 999 is 5,7%; and R250 000 and over is 5,75%.
My experience at the Nedbank branch was not positive. The consultant was vague and unsure of the costs. I was also not told by the branch about the Money 24 Investment account.
Outcome
For someone who just wants a high-yielding short-term savings account, Standard Bank’s Money Market Fund is the best product. The rate through Stanlib, its asset management arm, is very aggressive and has no additional fees. The rate kicks in for amounts as low as R25 000. The downside is that it is not ideal for a transactional account if you need to make several deposits or withdrawals a month. While unit trust money market funds were not part of this survey, they would be comparable to Standard Bank’s Stanlib offering.
For a transactional money market account with good rates, Absa’s product is excellent, but the upfront fee bites. You have to have a longer term view on your investment — the fee means that your rate for the first year drops to 6%. Neither FNB nor Nedbank have an exciting offering for a savings product, but FNB gives interest on amounts below R20 000, although Standard Bank’s MarketLink starts paying interest from R5 000.