It is no surprise that Standard Bank and Absa were rated the most expensive banks in South Africa in the Solidarity bank costs report, released on Tuesday.
Comparisons by Smart Money have shown that neither of these two banks would be first choice for cheap banking.
Capitec wins significantly, not only because of lower fees, but also due to interest earned — Capitec pays 7% on positive balances.
In an average profile, a person called John would be a middle-income earner with high electronic adoption, and would pay about R50 for a Capitec account. However, Solidarity assumed that John kept a R10 000 balance in his Capitec account in order to compare to other banks’ offerings, which provide fee discounts if a person maintains a balance of R10 000 a month. In this case, Capitec’s fee falls to R6,77 due to the interest offset.
The FNB Smart Account was rated second best at a cost of R62,84, with Nedbank’s best offering, Savvy Electronic, at R90,25. The cheapest Absa account is R98,39, while Standard Bank’s is R111,95.
Of interest is the price difference in selecting the correct account, even within the same bank.
If John was an FNB customer and selected the FNB Silver Cheque account rather than the Smart Account, he would be paying R93,35 a month. If he went for the Standard Bank Achiever fixed-fee account, he would be spending as much as R155,95 a month.
The Solidarity researchers really liked Capitec. The study found that although “Capitec’s ATM network is much less extensive than the networks of most other banks, it is relatively cheap to draw money at another banks’ ATMs”.
“Capitec charges a fixed fee of R3,75 per withdrawal at a Capitec ATM and a fee of R7 per withdrawal at the ATM of another bank. To put it into perspective: An Absa client with the standard current account pays R8,50 to draw R500 at an Absa ATM, whereas a Capitec client pays only R7 to also withdraw R500 at the same Absa ATM.”
The report also found that Capitec’s penalty fees (such as the dishonour fee for a debit order that is dishonoured because of insufficient funds) are set at R3,75, the lowest of all the accounts of the different banks studied.
Reason to complain
FNB may have reason to complain as the study did not include its EasyPlan account, which is a direct competitor to Capitec and would probably have seen it in strong contention as it also offers high interest rates and the fees are similar. Solidarity left it out of the report as it is currently only available at certain branches.
The study assessed a range of different profiles based on income — all profiles assumed that the customer was making cost-effective choices, such as opting for electronic channels, not using cheques, limited ATM withdrawals and using banks’ SMS notification programmes.
As a result the study is a very good guide as to the lowest bank fees a person can expect from each bank.
The report makes an important point about the sensitivity to bank fees of some people, and the importance of value-add accounts.
“People spending at the upper level of R31 000 per month are probably more concerned about additional benefits such as a personal relationship manager than about bank charges.”
So a person may look at the bank account’s total offering rather than simply focusing on the fee paid.
While many higher-end accounts offer bells and whistles that appeal to the high-net-worth individual, Solidarity avoided the quagmire of value-add offerings because these are difficult to quantify. As the union states: “Access to a comfortable room at the airport may mean much to one person, whereas another person might never use it at all or might not mind sitting in the public waiting area.”
However, the report points out: “People spending less than R7 500 per month will probably be interested mainly in the lowest bank charges, and this comparison clearly shows which accounts are the cheapest.”
At time of publication, the banks had not issued any statements. But Standard Bank customers can at least hope that if the bank is pursuing large-scale retrenchments, some of this cost-saving may translate into lower fees.
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