Although competition has driven bank fees down in recent years, with online banks disrupting the market by charging a fraction of traditional prices, the fact remains that South African banks continue to earn around half their income from bank fees. This is distinct from other countries where only 10% of bank income is derived from fees.
We find out how you can bank more smartly to manage those costs over which you have control.
Tip: If you’re not meeting your debt obligations, consider debt consolidation.
Cost versus value
Although it’s tempting to compare costs across banks, this doesn’t give us a clear picture of the value we’re getting from our accounts, says Cheslyn Jacobs, executive, sales and service at TymeBank.
“Consumers are becoming more value-sensitive, asking what they get in return for what they pay,” he says. “It makes sense to ask this question where bundle pricing exists – say, what you get in return for your R100 monthly fee – but you should also ask how your bank fees are made up, and whether the bank can justify what it’s charging.”
A bank may be offering you unlimited card swipes as part of your bundle fee - however, banks make interchange fees when consumers swipe their cards at stores, whether they charge their customers or not. It’s always worth questioning specific service charges.
Zibu Nqala, Chief Executive Officer, Entry Wallet at FNB, maintains that bank fees carry some validity.
“While banks try to keep service fees minimal, there are services that attract costs for them, like dishonoured fees,” she explains. “Plus, dishonoured debit orders can impact a customer’s credit status, so it’s worth discouraging this behaviour.”
Changing your banking behaviour
Nqala says customers should consider how to transact differently as some accounts are very affordable where few transactions are conducted. Three areas of potential saving include withdrawals, digital transactions, and rewards.
“Most people still use cash – and some economies drive this – but they should try to withdraw where costs are lowest. Using another bank’s ATM comes at a cost,” she says.
Digital purchases and payments can also save on fees. Jacobs agrees.
“Cash is the most expensive form of money,” he says. “The more you digitise your behaviour – card swipes, EFTs, mobile money – the less you will pay. You only really need cash for public transport these days.”
Rewards programmes can provide benefits, but these can be hard to understand or quantify, so be sure to ask questions. Getting cash back on fuel, groceries, and other products is helpful in tough times, but you need to swipe your card regularly to reap rewards.
“Rewards are structured around behaviour, and tailored according to the type of account you have,” says Nqala. “For example, customers with an FNB Easy PAYU account can earn grocery coupons for swiping at till points, which can be redeemed on a weekly basis when shopping at Shoprite or uSave.”
Tips for consumers
When reviewing your monthly bank statement, identify the transactions that attract costs over and above your monthly fee, Nqala advises.
“Plan to transact differently once you know what you can get for free and what you may need cash for,” she says. “Payment notifications tell you how much transactions cost, so pay attention to these.”
While some low-cost accounts appear to offer the best savings, consider which accounts offer good interest rates, which will help grow your money.
“You can’t look at fees or price in isolation,” says Jacobs. “Think about how you spend and what you could potentially save. If you can save R300 a month, you could potentially take out a life policy, for example.”
Another tip is to understand that interest rates are linked to your risk profile.
“Banks won’t only look at your affordability when you want to buy a car, for example,” cautions Jacobs. “They will look at transactions on your account, like large cash withdrawals that trigger a sharp drop in your balance.
"If there’s no record of what you’ve spent R2,000 on over ten days, you may have commitments the bank knows nothing about. Your banking behaviour affects your risk profile, which can affect your credit score.”
Tip: Want to know what your credit score is? Register with JustMoney.