Richard Branson certainly knows how to shake up the market. Banks have been in a frenzy during the past week, issuing releases and highlighting areas where they are actually cheaper than the Virgin Money offering.
It has been quickly pointed out there are credit cards on the market such as Edcon’s and Pick ‘n Pay’s Go Banking, which also have no annual fee.
The Big Four have also been quick to highlight the high cash deposit fee charged by Virgin.
But getting down to brass tacks with the Big Four can still be a mission. Take Standard Bank’s Bluebean. It issued staff with an internal memo, which was also made available to some journalists.
The memo acknowledges a R156 annual fee and says that the interest rate on debits is 17%. It doesn’t mention that, like my bank, this is only for debit balances of more than R10 000.
If your debit balance is less than that you will be charged 20%, unless you have Bluebean Silver. Then it is 17,5%.
The memo also stated that you receive 4,75% on positive balances. This too, however, is for the silver version. Complexity wins again.
The other price the banks have hit on is Virgin’s ATM withdrawal fee. This is virtually impossible to compare as all the banks use staggered pricing.
But if they compare Virgin to a R500 withdrawal, most are slightly cheaper. Virgin is a lot cheaper for a R1 000 withdrawal.
The banks also conveniently forget to add on Saswitch fees of about R5 should you withdraw from a different banking network. This favours Virgin’s flat-fee policy.
Pick ‘n Pay Go Banking has also come out with its “cheaper banking” campaign and it does offer a really well-valued banking product.
But, like the other banks, withdrawal fees become more expensive over R500 or through Saswitch. The overseas withdrawal fee is much higher.
Like Virgin they do not charge an annual fee and their replacement fee of R60 is cheaper than Virgin’s.
An interest rate of 16% charged on debit balances is very competitive and only slightly higher than Virgin but you have to have R15 000 in your account before it matches the 5% interest paid by Virgin.
But Go Banking has failed to capture the imagination of the public.
Where the banks are cheaper across the board is the R30 fee charged by Virgin for depositing cash at a branch or R15 at an ATM. This is steep by any standard.
But realistically, how often do people deposit cash into their credit card especially as the banks will Fica you to death to make sure it is not drug or terrorist money?
It is no wonder people are losing their faith in banks. What they sign up for is not always what they get. This has left the public with a feeling that the Big Four are ripping them off, creating an environment ripe for an apparent knight in shining armour.
The Big Four have a strong argument in the range of services that a fully-fledged bank can offer. Virgin’s Internet banking is still in its infancy and you can only transfer to a single account, namely your existing current account.
This means you cannot use it as a transactional account at this stage. Virgin is planning a range of products but starting with a credit card was clever because it is something people will often have as a stand-alone product.
They may already have a credit card but will test Virgin as a second card, especially as there are no annual fees or additional costs.
Surprisingly the banks have not so far highlighted delivery.
It took more than a week to hear from Virgin after my application. Perhaps the banks are no more efficient and so are afraid of pointing fingers.
Virgin’s Achilles heel will be delivery. If the banks really want to make a difference they should focus on service. Then they could argue that they are worth paying for.