• ETF Enthusiast

Average Joe's Banking

Banking fees are one of those things that many people let slip through the cracks and let carry on without much notice. The scary thing is that in the long term especially when you are young these fees can add up and you can end up spending thousands over the course of a few years if they are not properly controlled.

It can take a bit of initiative to find out exactly how much you are spending on it, because you need to go through your transaction statement in order to see exactly what is costing you the most in fees. Quite often these fees just tick over every day without the banks detailing how much you are spending and on what. It is definitely something that should be questioned more thoroughly when making the big decision of who you bank with and needs to go hand in hand with your trust for the bank and the service they provide. Evaluating all the fees and costs involved in banking also allows you to understand how your bank is earning its money from you and how you can go about reducing this so that you both can walk away happy.

Most of the major banks offer many different bank accounts which are very difficult to differentiate from one another on most factors except the price you are paying.These different accounts are based on how much you earn per month and therefore they often charge you more and more for the same transactions while only adding a benefit or two that you will be lucky to use once.

I think there is also a drive to promote income based accounts as a status thing where there are fancier cards and accessories the bigger the plan you are on, regardless of what your individual needs actually are.

If I use Standard Bank as an example they are offering the following banking accounts below available based on how much you earn. It is also important to note that all of these accounts offer the basic banking services that you need on a daily basis including internet banking.

The biggest difference between the Elite Banking and the Access Account was that you get a few extra ATM deposits and withdraws every month. You can also get a second Elite Account for your partner or spouse for a R16/month discount. Now if you are really withdrawing cash an extra 4 times per month from the ATM and need a second account for your spouse, then the next tier after the Access Account might be worth considering. But you cannot just go blindly based on what your monthly income is, you need to weigh up the differences and determine what the best fit for you is and not what the best fit for your bank is.

Banks are making a lot of their money on fixed monthly fee options hence the drive to promote this first. The single most effective way to save on your banking fees is to go onto a pay-as-you transact system. If you aren’t going to use every single one of the benefits and transactions that the monthly fee offers then pay-as-you transact is a clear winning every time. Monthly packages are also charging you pay-as-you transact prices for items which are not included in the bundle such as debit orders from external banks (which most of us have many) anyway.

My first bank account I owned with a bank that will go unnamed, I was paying close to R120 a month in fees, not only was I paying for all the normal daily banking charges but I was also being charged for the amount of time I spent on my internet banking platform. This is crazy and after I realised how I was being bled dry while I was not even earning any money for myself yet, I quickly changed banks.

Today I am happy to say that I am consistently being charged under R30 a month on a pay-as-you transact account with Capitec. This banking service offers me everything I need and have never wanted anything extra than what it offers. I very rarely need to withdraw money and if I do it costs me R1.30 from a supermarket till. The amount of monthly debit orders I have are under control as this is the area where banks charging the most for. All global one cards have EMV chips and are linked to Mastercard for online purchases.

Many other banks or cards also have loyalty systems like eBucks or discovery miles which at face value you might feel like you are getting rewarded for free. But you are always paying for these systems and services as they are built into your fees structure. Trust me the banks would not be implementing them if they were causing them significant loses.

There is also a perception that Capitec is the cheapest bank by far, this is actually not always the case. You often hear of Capitec’s claim to fame of a bank account for R5.25 well did you know as of 2016 fees structure that this is the most expensive admin fees against Standard Bank, FNB and ABSA’s entry level pay-as-you transact account.

Capitec, Standard Bank, ABSA and FNB all have very competitive entry level bank accounts and depending on your monthly habits it is possible to get a cheaper bank account with any of these banks. The difference is that all the other banks have many different accounts on offer and people aren’t taking the time to differentiate these accounts and chose one specific for their needs. Capitec just has one pay-as-you transact account. Plain and simple.

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