By Ashleigh Brown, journalist, Justmoney
Pay-as-you-transact (PAYT) accounts have been advertised as value for money, as clients only pay for what they use, but according to the latest Solidarity Bank Charges Report, these accounts are more expensive than Bundle Accounts.
The Solidarity Bank Charges Report looks at five major South Africa Banks fees on various accounts to determine which is the cheapest, includingNedbank, First National Bank (FNB), Absa, Standard Bank, and Capitec.
The report only deals with the bank charges of personal transactional accounts. Therefore, the cost of credit products such as credit cards, overdraft facilities, vehicle financing, home loans and personal loans are not highlighted in the report. Furthermore, the report does not look at the reward schemes for each of the banks either.
Cheapest account
This year, the cheapest account is Capitec’s Global One Account – the company’s only transactional account. Riaan Stassen, the bank's previous CEO, said in 2011: “I have yet to understand why [a high net worth customer and a blue-collar customer] should pay different charges for using the same facilities.” Thus, Capitec’s account has no income segregations like other accounts.
“Due to the fact that Capitec's Global One account pays appreciable interest on any positive balance, this account can still be crowned the cheapest. Any client who actively uses the bank account will unavoidably have a significant positive balance in the account on average during the course of each month,” highlighted the report.
For example, with an average monthly balance of R2 380 a Capitec client will earn interest of R8, 56, which will lower the net bank charges to R22, 94 on the transaction profile with 12 transactions per month. The higher the balance, the higher the interest earned on the account. At an average balance of R8 762, for example, the bank charges on this transaction profile will be fully offset by the interest of R31, 50 per month.
(See report for full table of costs, click here).
Low income
The Solidarity report is broken up into four different user profiles, highlighting the cheapest needs for each type of user. The first such profile is for low income users with basic needs, who would make 12 transactions per month.
Although Capitec is still the cheapest account in this category, there is fierce competition from Absa’s Easy Transact account (R23 per month) and FNB’s EasyAccount (R22.95 per month). This is due to the fact that all the previous limitations on the Absa and FNB accounts, such as restrictions to access at certain branches or restrictions on internet banking services, no longer exist. “This means that these accounts now properly compete with Capitec. A notable feature of Absa's Transact account is that no fee is charged for unsuccessful debit orders – the only account offering this benefit,” explained the report.
Low income with more needs
The second user profile is based on a client making 17 transactions per month. Again, Capitec is the cheapest account on offer at R39, 21 per month with a balance of R2 000, followed by Absa’s Flexi Value Bundle (R51, 25 per month) and FNB’s Smart Unlimited account (R52, 50 per month). However, the report highlighted that during the past few years, the number of accounts in this category have thinned out considerably.
“Only Absa and FNB still have accounts which are specifically in this category. Standard Bank and Nedbank withdrew their accounts, which used to be in this category. Capitec's Global One account is included here as well, as it is as suitable for clients in this category as it is for clients in the previous category,” said the report.
Middle class income
The third user profile is aimed at the middle class income bracket, with sophisticated banking needs. The report highlights that this profile is aimed at the core client base. In this profile, users make 24 transactions a month.
As Capitec only has one account, it is included in this category, but differs as it is not a bundle account like the others. However, the report highlights that the PAYT accounts are so expensive in this category, that it does not make sense for a client to take that option. “The fees per transaction on the equivalent pay-as-you-transact accounts are so extremely high that it would not make sense for almost any client to opt for a pay-as-you-transact account rather than a bundle account,” said the report.
Looking only at the bundle accounts offered in this category, Nedbank’s Savvy Plus account (without the option of withdrawing cash at the till for R89 a month) comes out top, followed Absa’s Gold Value Bundle (R101, 75 per month) FNB’s Gold Cheque Unlimited (R105, 50 per month) and Standard Bank’s Elite Plus account (R108, 50 per month).
Upper middle class income
The last profile in the report is for users making 29 transactions per month. “All of these accounts include significant additional benefits, which is the main reason why some clients would opt for these accounts rather than for accounts in the previous category or for Capitec's account,” said the report. Therefore, Capitec’s account is not included in this profile.
The cheapest account in this category is FNB’s Platinum Cheque Unlimited account (R151, 60 per month), followed by Absa’s Platinum Value Bundle (R153, 50 per month). Nedbank’s Savvy Bundle, in third place costs R169 a month, and Standard Bank’s Prestige Plus account costs R184, 40.
“To most clients at this level, the quality of the additional benefits and quality of a bank's service would therefore be more important than the difference in bank charges,” said the report.
Therefore, it is important that a client know what their banking needs are and to find out if they are paying too much on bank charges.
Tips
Solidarity has some tips to determine if you should change bank accounts:
• Look at the account that you have now and compare it to the other accounts on offer at the same bank. Banks have more than one account.
• Find out how often you are transacting, and how much you are paying in a month for bank charges. If you are paying more than R120 a month, you could be paying too much.
• Contact the banks for more information on the products they offer, and which would be a cheaper option for your needs.
Table of costs
Below is a table of the costs discussed in the article, for the full report and all other costs, click here.
|
|
Capitec |
Absa |
FNB |
Nedbank |
Standard Bank |
|
Profile 1 |
R22, 94 |
R23, 00 |
R22, 95 |
R56, 40 |
R32, 80 |
|
Profile 2 |
R39, 21 |
R51, 25 |
- |
- |
- |
|
Profile 3 |
R56, 81 |
R101, 75 |
R105, 50 |
R89 |
R108, 50 |
|
Profile 4 |
- |
R153, 50 |
R151, 60 |
R169 |
R184, 40 |
Source: Solidarity Bank Charges report 2014, prices correct as of 30 September 2014.