your guide to bank accounts

INDEX:

 

- What is a bank account?

- Why do I need a bank account and what will I use it for?

- What features do bank accounts have?

- Fees and Charges

- How do I pay my fees and charges?

- Putting it all together

What is a bank account?

A bank account is a safe and practical place to keep your money. When you open a bank account you enter into an agreement with the bank whereby you give your money to the bank to look after and the bank then provides you with easy and instant access to your funds in addition to a number of other useful features. This is the sort of account that people use on a day to day basis as opposed to a savings account which may offer you better earnings on your money. Savings accounts are usually not practical for everyday living.

    
Why do I need a bank account and what will I use it for?

As with most things there are positive and negative aspects to bank accounts but so long as you choose wisely and shop around to find the bank account that suits you best you will almost certainly find that the advantages far outweigh the disadvantages. Having a bank account provides a safe place to have your income paid into, makes it quick and simple to pay your bills and allows you to monitor your expenses. Furthermore, it comes with a debit card and this means that instead of having to carry large sums of cash around with you, which is both dangerous and a bother, you can make purchases quickly and easily in most shops and you can access your funds in a bank branch or any ATM wherever you are.

What features do bank accounts have?

Some banks may have introductory offers or rewards for opening an account with them but don’t make your decision based upon this alone. You must make sure that the bank account you are choosing will be best for you in the long run. To do this you must work out what features you require from your account and what fees you will be charged for them. Your bank account will come with a debit card and with this alone you can perform the majority of functions that you need to but there are additional features that a bank account can offer so you should consider these features and the related questions:

Cheque book - you should think about whether or not you also require a cheque book. If you do there will be additional fees and you should bear in mind the following points: paying by cheque is slower than paying with a debit card, carrying a cheque book can be impractical and criminals can intercept cheques and rewrite them. For these reasons the use of cheque books is becoming outdated and people tend to favour the use of a debit card.

Overdraft facility - do you need to have the option of an overdraft, and if so how large do you need it to be?

Earning interest on your balance - if you tend to have a significant amount of money in your account rather than being in the red then it may be important to have a bank account that earns you interest on the balance of your account. Different banks will offer different rates of interest or none at all, so make sure you take this into consideration.

Efficiency and service - this is not so much a specific feature of your bank account but rather your bank as a whole. It can be difficult to gauge the efficiency and service of a bank but you can get a rough idea by using their website, speaking to the managers and phoning the bank. For most people this is of great importance because after all you’re giving your money to the bank and you want to be reassured that they will look after it and you.

These are the basic features to consider when looking for the right bank account but if you are a person with a higher income (> R15,000) then you may have the option of additional facilities. These may include: life cover, a credit card, an interest free overdraft and access to savings and investment products.

Fees and Charges

Banks have a complicated system of fees so it is absolutely vital that you figure out which account is best for you. For example, if you have a large sum of money in your account then a good interest rate will be very important, but if you are constantly low on money and making lots of payments then it will be more important to have a low transaction fee. The fees you may be charged include the following:

Monthly administration fee - this is just the cost of having the bank account and debit card. On top of this you will be charged for one offs such as replacement of a lost card.

Cash withdrawal fee - banks charge you for withdrawing cash but the amount you are charged will depend on how much you withdraw and where you withdraw it from. You will be charged less for withdrawals from your bank’s ATM but more for withdrawing cash from a branch counter or a Saswitch ATM. When paying in shops with a debit card you may have the option of getting cash back but you will also pay a fee for this.

You need to consider whereabouts you will be withdrawing your money from and how often each month you will do so. Withdrawing from your own bank’s ATM will cost you less than from other banks.

Cash deposits, fund transfers, account payments - you will be charged for paying cash into your account, paying money out of your account, paying via a debit/stop order and transferring money between any of your accounts. The fees for these transactions can be complicated and they depend on a number of things such as the size of the transaction and whether or not you are transferring money between two accounts with the same bank or accounts with different banks. In any case you will normally be charged more for carrying out these transactions at a branch counter than at an ATM.
You need to consider how often and how much money you will be paying in and out of your account.

Balance enquiries and statement fees - you will be charged for making balance enquiries and getting a bank statement but the amount you are charged will depend on whether you do it at your own bank’s ATM, at a branch counter or at a Saswitch ATM.

Electronic banking fees - banks now offer the option of banking over the internet, via phone or cell phone, or even via SMS in some cases. The amount they charge varies for each facility but it may be the case that if you pay for internet banking then you get phone banking free. You need to consider your preferred means of banking and your ease of access to your bank and it’s ATMs. If you live far away and have internet access it may well be a good idea to use internet banking or phone banking; it is a quick and easy way to make payments, transfer funds and keep an eye on your expenses. If your bank offers you the facility of internet banking you need to check that you can bank online at any time or if the facility closes down at certain times of the night.

Transaction limits - some bank accounts charge you a lower fee for a limited number of transactions but then a much higher fee for any additional transactions.
You need to find out what the transaction limits are on your account, if any, and avoid exceeding them.

Dishonoured fees - your bank account will charge you if you make payments from your account that you cannot afford, if payments are returned and if you deposit post dated cheques.
You need to be aware of these charges and keep a close eye on your finances to avoid incurring them.
 

How do I pay my fees and charges?

In this ‘What to look out for’ section you can see what sort of services you can expect to be charged for. However, there are different ways of paying for the services you use.

Standard Fee: this is the simplest way where you are charged a set amount for each transaction as you go. If you don’t know what you will be doing each month but you generally don’t do a lot of transactions, this may be the best option for you.

Management Fee: you can choose to pay a set amount for a ‘package’ of transactions; a pre-determined number of transactions that you can make. It will either be a set number of each specific type of transaction or the number of total transactions of any kind. You will then pay a set fee for each further transaction beyond what your package includes. If you use your bank account in the same way each month this way of paying may suit you.

Rebate Banking: banks will offer preferential rates and charges for customers who always have more than a certain amount of money in their bank account. If, for example, you always have more than R10 000 in your account then you can expect not to pay any fees for purchases, withdrawals, deposits and fund transfers. If you can afford Rebate Banking this may be the good option for you, however, if you have a significant balance it may be better to open a savings account as the interest you earn there may well outweigh the benefit of paying fewer charges for your bank account.

Putting it all together

Banks have very confusing and complicated charging schemes in place and unless you are fully aware of what these are you will end up paying more than you should do. However, by considering your own specific banking needs and using the comparison calculator, you will be able to successfully navigate through this maze and find the bank account that suits you best.

What you need to do:

1) Decide carefully what features and facilities you need from your bank account so that you only pay for what you want and not for anything you don’t use.
2) Make sure that you register your current status at your bank: if you are below 18, over 55 or a social grant beneficiary then you can benefit from discounted fees and fee exemption.
3) Use the banking calculator to compare what you can expect to pay with each type of bank account so that you can find the account that best suits you.