Opting for a single-transaction account

Zimasile asks: I have a mortgage bond with Standard Bank and a savings account with Absa, which always has on average R60 000 every month.

I once read about combining your mortgage, savings, current accounts etc into one to reduce your interest charge on your mortgage. Please advise me on this, or on any method recommended to economise on mortgage payment. I’ve been paying extra every month since I took out my mortgage, that’s the only method I know of.

Maya replies: Theoretically it makes a lot more sense to deposit your lump-sum savings in your mortgage because it reduces the interest that you pay. While you would receive at most 6,5% interest on your savings, by depositing the money in your mortgage you save about 9% in interest payments.

There is no right or wrong answer but I personally prefer to keep my money in separate “pots”. I pay extra into my mortgage but I like to keep my savings where I can see the actual balance.

What can happen is that you start to treat your mortgage like an ATM and unless you are keeping careful track you may end up spending debt and not savings. But it is a personal choice and not necessarily the most cost-effective.

A single account for your transactional account, savings account and mortgage is available. FNB, for example, has one called the One Account and the private banks also offer similar types of accounts.

I do have a serious concern with these because although it will save you interest, again like saving into your mortgage, unless you are keeping careful track you are not sure if you are spending your salary or debt.

It takes a lot of discipline to manage this type of account. I like to see what my current balance for the month is and manage my spending accordingly.

I previously had an account which rolled my credit card and transactional account into one and we landed up in debt without even realising it.

If you are the type of person to track your spending carefully, a “one account” can save a significant amount in interest, but if not it can lead you into financial difficulty.

I would be interested in other readers’ experiences.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.

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Maya Fisher French
Guest Author

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