Paying too much in bank charges

In South Africa’s somewhat peculiar banking system, monthly charges for transactional accounts are a given. But is the few hundred rand you’re paying per month (if you’re lucky!) the best possible deal?

The first question you need to answer is whether you value having a ‘platinum’ or ‘private clients’ account with all the “value-adds” these offer?

Things like lounge access, bundled credit cards and a ‘personal’ banker are must-haves for some in the upper middle market. On the other end of the scale are basic, no-frills bank accounts (like Capitec’s Global One (and the clones from the other major banks)), but the truth is that most people need something a little more comprehensive than that. There’s likely a home loan, almost certainly vehicle finance and definitely a credit card.

So, do you need a ‘platinum’ (Premier/Prestige/Savvy Bundle)-type account? Do you actually use or need those value-adds? Or, do you enjoy the ‘status’ of having a platinum or black credit card? (Here, emotion – and ego – comes into the equation….)

This is an important question to answer, because the difference in bank charges between a more vanilla bundle account and ‘platinum’ is easily 50%!

While banks try to shoehorn you into product categories based on your salary or profession, there’s nothing stopping you from moving to another product (or refusing those ‘upgrades’). From a personal perspective, the only reason I have an FNB Premier (i.e. platinum) account (not gold) is because I do actually make use of the ‘free’, albeit diminishing, Slow Lounge access. And, the eBucks rewards I earn on this account are the most lucrative of the lot, based on the products I use, my transaction habits and spending patterns. (‘Upgrading’ to Private Clients is a mugs game because the thresholds for ‘earning’ rewards are significantly higher, to match one’s status and earnings, of course!)

Once you’ve answered this question – which is more important than most people realise – the next step is to figure out whether a bundled account or pay-as-you-transact one makes the most sense. Most of us enjoy not having to ‘worry’, so we readily sign up for the all-in-one package without actually understanding the differences in pricing.

In this example (loosely based on my transaction history), the bundled option makes the most sense. But, you’ll find that this is not always the answer. It is worth dissecting what does and what doesn’t form part of the bundled options from your bank. In all cases (at the higher end, i.e. platinum), debit orders and electronic transactions are ‘free’ and some transactions like cash withdrawals are free up to a certain number per month. But there are some variances that will attract fees over and above the flat monthly rate.

Once you’ve done this exercise – which you need only do once a year (June for FNB customers and December for Absa/Nedbank/Standard Bank ones), you’ll know exactly which account type suits you best. If you’re on pay-as-you-transact and you’re spending more than ±R200 a month consistently, you should change to bundled. If you’re on bundled and do a handful of transactions a month (and don’t have too many (any) external debit orders), then pay-as-you-transact will save you money. You’re not looking at hundreds of rands a month year, but across a year your savings would easily add up to over R1000.