Most banks charge for their services, but fees can vary widely, depending on the institution and account. Banking costs can be a grudge expense – particularly when they are perceived as excessive.
We explore why bank charges can be high and consider ways to reduce them.
Tip: Learn more about the value of saving and investing for your future.
What makes banking expensive?
“Banks in South Africa rate among the top in the world,” says Rudi Bouwer, a wealth planner at The Wealth Room. “The banking world is competitive and banks attempt to add value while remaining profitable.”
Vanesha Palani, an executive for financial management at Nedbank, explains that banks in different markets apply specific policies to price their products. “Bank charges mainly cover the cost of maintaining your account. They may also cover costs for additional perks, such as free use of the bank’s ATMs, cashback on spending, and more.”
Traditional banks need to invest in both their physical infrastructure and fintech-based systems, while servicing high fixed costs. Digital banks, however, can streamline their operations from the outset, often resulting in lower fees.
Cash is expensive to transport, store, and safeguard, translating into high fees on cash transactions. Still, 25% of the country’s banked population prefers to withdraw money to transact in cash, according to PwC’s 2022 Payments and Open Banking Survey.
Do you get what you pay for?
Monthly administration fees vary from zero with, for example, Bank Zero, Tyme Bank, and Nedbank’s MiGoals account, to an all-inclusive R605 for Investec’s Private Banking Platinum account.
However, in some cases, the seemingly cheapest option could work out to be the most expensive, cautions Bouwer. “Each bank charges different transaction fees and offers different value-added services.”
Palani agrees. “We encourage clients to honestly evaluate their banking behaviour, including adding up their number of payments, receipts, debit orders, deposits, and transfers,” she says.
“Once we have this information, we can recommend the most suitable bank account for a customer’s needs and budget. Accounts with bundled fees are often convenient and affordable, and offer incentives and rewards.”
Capitec offers a single bank account designed to meet the needs of most South Africans. “We believe no one should pay more for banking because they earn more, or receive less because they earn less,” explains Justin Isaacs, Capitec’s public relations coordinator.
“We serve 21 million clients by embracing new technology and efficiency, which keep our prices reasonable.”
How can you curb costs?
Paying extra for immediate online payments is an avoidable expense. Some bank accounts include a limited number of real-time clearing payments in their fixed fees, but they’re usually charged individually, and you can pay anything from R7 to R50 per transaction, depending on the sum involved.
Make sure you have enough money in your account for your debit orders to go off – unpaid debit orders due to insufficient funds incur penalty fees varying from R10 to R140 or more. You may also end up paying an additional debit-order resubmission fee.
Palani recommends using digital platforms for banking and shopping, and keeping cash transactions to the minimum. “If necessary, withdraw cash at a supermarket till point at a lower fee.”
Maintaining multiple accounts with different banks can also be expensive. “Stick with one bank, especially if all your accounts can be consolidated into a bundled package with a single monthly fee,” she adds.
Can you benefit from added value?
“Banks’ loyalty programmes are designed to keep you loyal,” notes Bouwer. “If you keep within the parameters, the rewards are attractive.”
Extras offered can include life or funeral cover, cashback on fuel and groceries, movie ticket discounts, airport lounge access, mobile data, and more.
Tip: Use our budget calculator to help you take control of your finances.