Mail & Guardian
Mail & Guardian

Managing your banking fees

5 min read

Bank fees are once again in the spotlight with a survey released by FinWeek showing that they have increased 16%. A few months ago financial website www.justmoney.co.za ran a poll that showed that of those surveyed, 42% pay more than R200 a month in banking fees.

But how much of this disgruntled attitude to banking fees is perception rather than reality?

Sugendhree Reddy of Standard Bank says they recently undertook a survey of their customers. Although 87% of their customers are on bundled options, which lower their banking fees, 80% of surveyed customers did not know they were on the option and thought their fees were higher than they actually are.

The reality for many people is that although we are quick to complain about banking fees, few actually know what those fees are or what to do to reduce them.

Gareth Mountain, of www.thinkmoney.co.za, a financial product comparison website, says that although banking customers are quick to complain about fees, they will not take the time to compare banking products and find the best option.

“We have the facilities and tools to help them find the best product but it is the hassle factor. It is easier to complain than to do something,” says Mountain. He points out that banks are making it easier to move bank accounts, citing Nedbank as an example with its Hassle Free Move campaign by which the bank undertakes to move all your debit orders to your new account with penalties paid to charity if it does not meet its service promise.

Andy Gilder of www.justmoney.co.za says that from regular reviews they have seen an increase in the fees clients will pay if they continue to transact at a branch.

“But we have also seen there are savings to be made in the form of electronic and internet banking. Several banks are increasing the number of free transactions on managed-fee accounts. If you bank online instead of at your local branch, your savings will be huge — it is probably the easiest way for consumers to make savings.”

To cut your banking fees there are three simple steps: don’t write cheques, don’t walk into a branch and use only your bank’s ATM.

Cutting your banking fees: How a typical family could slash costs

Based on Standard Bank’s pricing schedule, the FinWeek family could have saved 27% as a pay-as-you-transact customer and 25% as a bundled-option customer if they banked more effectively

Switch to a better-priced option:

  • Bank charges can vary for similar services. Standard Bank says opting for its bundled option as opposed to pay-as-you-use charges would save 44% a month on fees
  • Knowing which account is best for you can be confusing but your bank will be able to recommend the best option based on your profile
  • Bank account comparison calculators such as www.thinkmoney.co.za or www.justmoney.co.za can help you choose the most cost-effective account

    Stick to your bank:

  • Using the ATM of another bank costs more because of Saswitch fees. The typical family in the report made two cash withdrawals from other banks’ ATMs and had to pay extra fees.
    If the sample family had managed its cash needs better and only made withdrawals from a Standard Bank ATM they would have saved R13,40 a month
  • Some banks pay for your extra fees if they are responsible. James Fowle of FNB says that if you are forced to use another bank’s ATM because an FNB ATM is not working you can call them and they will reverse the transaction fee
  • A cost-effective alternative is to withdraw cash with your debit card when paying for purchases at retailers such as Shoprite and Pick n Pay

    Limit your overdraft:

  • One bank’s above-inflation fee increase was partly owing to the fee for maintaining an overdraft facility. Sugendhree Reddy of the bank in question, Standard Bank, says that many people do not even use their overdraft facility yet the bank has to keep the capital aside to match the liability — this costs money
  • Rather than paying R21 a month for a facility you don’t use, lower your overdraft limit to R300 and you will not pay any fees.
    This would have saved the sample family R42 a month
  • Consider using a credit card as an emergency overdraft facility.
    Virgin Money, for example, has no annual fee so the facility costs you nothing. Credit card interest rates are higher so you would need to pay it off quickly

    Throw away the cheque book:

  • Few people use cheques today. The sample family used only three cheques a month. Cheques are extremely expensive to process and as the volumes decline it costs banks more to handle them. This means cheques will become even more expensive to use. The family spent R43,50 a month writing out cheques. Had these transactions been done electronically this would have saved the family R13,75 in fees
  • Most banks’ bundled options include electronic payments so the family’s savings could have been greater

    • Use a debit order:

  • By opting for a debit order to make payments rather than a stop order, the family could have saved R65,30
  • Bundled options offer a certain number of stop orders and debit orders that are included in the monthly fee

    Don’t use the branch:
    Using branch tellers to withdraw cash is one of the most expensive transactions for banks because of the cost of cash security. The household in the report drew R1 500 a month in cash from a branch. By using an ATM they would have saved R18,55. With ATMs and debit cards there is never a need to draw money from a branch