Bank Charges Report. your. Solidarity. Solidarity Research Institute RESEARCH REPORT

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1 Solidarity Research Institute RESEARCH REPORT Solidarity Bank Charges Report 2012 Make your move! Download the report at Solidariteit Beweging A comparative analysis of the cost of personal transaction accounts at five South African banks October

2 DISCLAIMER No part of this report is intended to give official financial advice to any particular person or group of persons. Solidarity and/or any related organisations or institutions assume no responsibility for the manner in which any part of this report may be used. Although every effort has been made to convey information supplied by banks in their price literature and on their telephone helplines accurately, errors may have occurred in the transcription and/or interpretation of the data. Solidarity and/or any related organisations or institutions do not guarantee the accuracy of the data and assume no responsibility for any consequences that inaccurate data may have.

3 Table of Contents 1. Summary of methodology and results Comparison of 2011 and 2012 s charges General observations about transferring a bank account Comparison between different banks and accounts Capitec - general information and impressions Absa - general information and impressions First National Bank (FNB) - general information and impressions Standard Bank - general information and impressions Nedbank general information and impressions Comparison of bank accounts according to different user profiles User profile one R7 500 per month User profile two R per month User profile three R per month User profile four R per month General impressions from the cost comparison Costs of transmission accounts Capitec Absa FNB Nedbank Conclusion on transmission accounts Costs of current accounts Absa FNB Standard Bank Nedbank Conclusion on current accounts Comparison of new low cost accounts Absa Transact FNB Easy Account Standard Bank AccessAccount Nedbank Ke Yona Comparison of the low cost accounts on the R7 500 and R profiles...77 Appendix A - Complete tables of costs per account Appendix B - Cost of cash and cheque deposits

4 1. Summary of methodology and results This report compares the bank charges of different bank accounts held at five of the most well-known and popular commercial banks in South Africa. The comparison is based on a range of user profiles, each with a different combination of monthly transactions. In general, Capitec still remains the cheapest in 2012, followed by FNB, Absa and Standard Bank in that order with Nedbank taking up the last position, its charges mostly being the highest this year. Capitec, FNB, Absa and Standard Bank have all lowered their bank charges during the period under review, while Nedbank s charges have increased marginally. 1 Accounts were selected which are relevant to the socioeconomic characteristics of the major part of Solidarity's membership and support base. In most cases, this covers all the basic and intermediate transaction accounts offered by the banks in question. The methodology followed for the most part of the report includes that if the bank account offers positive interest, the interest on a positive balance is subtracted from total costs. In the case of accounts where a minimum balance has to be maintained interest free in order receive a discount on bank charges, the forgone interest 2 on the minimum balance is added to total costs. Appendix A does contain tables in which the effect of interest has been omitted, but fair comparison actually demands that the effect of interest or forgone interest be included. Aspects such as the costs of credit cards, overdrafts, home or vehicle financing, private banking services and other matters not forming an intrinsic part of transaction accounts were not included in the analysis. This is because the cost of these products and services is, to a large extent, determined by factors that vary from person to person. Banks' terminology and account names were in most cases left unchanged in order to prevent any confusion. The names of transmission accounts are italicised to distinguish them from full-service cheque accounts. 1 This paragraph represents only a brief summary of the results. The report has to be read in its entirety to get an overall picture. 2 The highest positive interest currently offered by any of the accounts in the study on an amount of R or more, is 4,25% by Capitec.(Capitec also offers 5% interest on balances of less than R10 000) It differs marginally from the rate applicable in last year s study, which was 4,75%. This rate (4,25%) was used to calculate forgone interest (opportunity cost) on accounts on which a minimum balance has to be maintained to obtain lower bank charges. 4

5 All of the Big Four commercial banks now also market a low cost account: Absa s Transact, FNB s EasyPlan, Standard Bank s AccessAccount and Nedbank s Ke Yona. These accounts will be dealt with separately in section 5 of the report. For illustrative purposes, the banking habits of a fictitious person can be used as an example to illustrate the findings of the study. This person spends about R per month. He tries to use only electronic banking services, as his bank recommends. Also on his bank's advice, he tries to do only a small number of transactions each month and rather to spend larger amounts at a time. He makes two cash withdrawals of R500 per month at a point of sale, and makes debit card payments three times a month. He has five debit orders, four stop orders 3 and he makes three internet transfers per month. He makes one change to a stop order per month. As is recommended, he also uses his bank's SMS notification service to keep abreast of activity on his account. He makes a balance enquiry once a month and receives his monthly bank statement electronically. He manages to maintain the minimum balance required by his bank in order to receive a discount on bank fees (if applicable). He is never in breach of any of his bank's rules which is to say that none of his transactions ever get declined for lack of funds. He also never deposits any cheques or cash at branches or ATMs. 4 This person s bank charges on accounts with the various banks that formed part of this investigation are shown in table 1.1: 3 A debit order is an instruction by a client to a third party to debit the client s bank account with an amount that can differ from month to month. A stop order is an instruction by a bank client to his or her bank to pay a specific amount to a beneficiary every month. 4 See Appendix B for information about the charges for cash or cheque deposits. 5

6 Table 1.1: Bank costs with expenses of R per month (Effect of interest included) Bank, account and option Monthly costs 1 Capitec - Global One (R34,74 interest) R 6,76 2 FNB - Smart Cheque - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 34,42 3 FNB - Gold - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 34,42 4 FNB - Platinum - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 34,42 5 FNB - Smart - P.a.y.u. (Fee saver) (R17,37 forgone interest) R 46,22 6 FNB - Smart - Unlimited R 52,15 7 Standard Bank - Elite - Refund (R34,74 forgone interest) R 65,79 8 Absa - Silver Value Bundle R 81,25 9 FNB - Smart Cheque - Unlimited R 82,15 10 Nedbank - Transactor Plus - Bundle R 93,10 11 Standard Bank - Achiever - Electronic R 94,55 12 FNB - Gold - Unlimited R 100,15 13 Nedbank - Savvy Electronic - Bundle R 100,40 14 Absa - Flexi R 106,65 15 Absa - Gold Value Bundle R 111,25 16 Nedbank - Transactor Plus - P.a.y.u. R 111,75 17 FNB - Smart - Zero monthly fee R 114,65 18 Standard Bank - Elite - P.a.y.t. R 116,05 19 Standard Bank - Elite - Fixed fee R 117,55 20 FNB - Platinum - Unlimited R 123,15 21 Nedbank - Everyday Current - Bundle R 126,40 22 Absa - Current - Standard fee R 135,95 23 Absa - Gold Current - Standard fee R 143,95 24 Absa - Platinum Value Bundle R 151,25 25 Nedbank - Current - P.a.y.u. R 178,85 This table represents a simplified version of part of the results of the study. For more detailed results, please study the part of the report that contains detailed tables and graphs. The fact that an account is cheaper for this profile than another account does not necessarily imply that this will also be the case for any other level of spending and spending pattern. Keep in mind that positive interest and forgone interest play a role here. See table A2 and A5 in Appendix A for information where the effect of interest or forgone interest was not taken into account. 6

7 Table 1.2: Average bank costs of eight transaction profiles (Dishonour fees excluded and effect of interest or forgone interest included) Average Bank, account and option monthly costs 1 Capitec - Global One (R34,74 interest) R 20,76 2 FNB - Smart Cheque - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 43,22 3 FNB - Gold - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 43,22 4 FNB - Platinum - P.a.y.u. (Fee saver) (R31,27 forgone interest) R 43,22 5 FNB - Smart - Unlimited R 60,95 6 FNB - Smart - P.a.y.u. (Fee saver) (R17,37 forgone interest) R 71,35 7 FNB - Smart Cheque - Unlimited R 90,95 8 Absa - Silver Value Bundle R 91,05 9 Standard Bank - Elite - Refund (R34,74 forgone interest) R 108,59 10 FNB - Gold - Unlimited R 108,95 11 Standard Bank - Achiever - Electronic R 109,81 12 Nedbank - Savvy Electronic - Bundle R 112,61 13 Absa - Gold Value Bundle R 121,05 14 Nedbank - Transactor Plus - Bundle R 124,29 15 FNB - Platinum - Unlimited R 131,95 16 Nedbank - Everyday Current - Bundle R 133,61 17 Standard Bank - Elite - Fixed fee R 135,44 18 Absa - Flexi R 141,48 19 Nedbank - Transactor Plus - P.a.y.u. R 151,20 20 Standard Bank - Elite - P.a.y.t. R 155,75 21 Absa - Platinum Value Bundle R 161,05 22 FNB - Smart - Zero monthly fee R 166,08 23 Absa - Current - Standard fee R 171,68 24 Absa - Gold Current - Standard fee R 179,68 25 Nedbank - Current - P.a.y.u. R 227,80 This table represents a simplified version of the results of the study. For more detailed results, please study the part of the report that contains detailed tables and graphs. The fact that an account is cheaper for this profile than another account on average does not necessarily imply that this will also be the case for any other level of spending and spending pattern. Keep in mind that positive interest and forgone interest play a role here. See table A2 and A5 in Appendix A for information where the effect of interest or forgone interest was not taken into account. 7

8 The information contained in tables 1.1 and 1.2 indicates that Capitec, thanks both to low charges and high interest on positive balances, generally remains the cheapest bank. Capitec is followed by FNB, Absa, Standard Bank and Nedbank. The sequence has changed since last year s study when Nedbank was in the third position. Absa s and Standard Bank s comprehensive efforts to make their bank charges more competitive are evident in these results. Some of FNB s and Standard Bank s accounts contained in tables 1.1 and 1.2 in the previous two tables require that a specific minimum balance (from R5 000 to R depending on the account) must be kept in the account to qualify for discounts on bank charges. Many bank clients are, however, unable to maintain such minimum balances. 5 In the following table (1.3) FNB s Pay as you use (Fee Saver) accounts were replaced with the regular Pay as you use accounts, and Standard Bank s Refund account was omitted. Table 1.3 is therefore only a summary of those accounts where no minimum balance is required. In table 1.3 interest on a positive balance plays no role either. As in table 1.2 above, the table reflects the average bank charges of eight different transaction profiles without dishonour fees. 5 Absa s Value Bundle accounts also offer specific discounts if certain minimum balances are maintained. A balance of R offers a 10% discount on the monthly service fee. A balance of R offers 20% discount and a balance of R offers 50% discount. However, in all instances the opportunity cost of forgone interest exceeds the discount amount which can be obtained. Therefore it would have been unfair towards Absa to include the difference between the discount and the forgone interest in general comparisons of the Value Bundles throughout the report. 8

9 Table 1.3: Average bank costs of eight transaction profiles (Dishonour fees and effect of interest or forgone interest both excluded) Average Bank, account and option monthly costs 1 Capitec - Global One (No interest included) R 55,50 2 FNB - Smart - Unlimited R 60,95 3 FNB - Smart Cheque - Unlimited R 90,95 4 Absa - Silver Value Bundle R 91,05 5 FNB - Gold - Unlimited R 108,95 6 Standard Bank - Achiever - Electronic R 109,81 7 Nedbank - Savvy Electronic - Bundle R 112,61 8 Absa - Gold Value Bundle R 121,05 9 Nedbank - Transactor Plus - Bundle R 124,29 10 FNB - Smart - P.a.y.u. R 130,03 11 FNB - Platinum - Unlimited R 131,95 12 Nedbank - Everyday Current - Bundle R 133,61 13 Standard Bank - Elite - Fixed fee R 135,44 14 Absa - Flexi R 141,48 15 Nedbank - Transactor Plus - P.a.y.u. R 151,20 16 FNB - Smart Cheque - P.a.y.u. R 152,33 17 Standard Bank - Elite - P.a.y.t. R 155,75 18 FNB - Gold - P.a.y.u. R 157,33 19 Absa - Platinum Value Bundle R 161,05 20 FNB - Platinum - P.a.y.u. R 165,33 21 FNB - Smart - Zero monthly fee R 166,08 22 Absa - Current - Standard fee R 171,68 23 Absa - Gold Current - Standard fee R 179,68 24 Nedbank - Current - P.a.y.u. R 227,80 This table represents a highly simplified version of the results of the study. For more detailed results, please study the part of the report that contains detailed tables and graphs. The fact that an account is cheaper for this profile than another account on average does not necessarily imply that this will also be the case for any other level of spending and spending pattern. To get the full detail, broken up by transaction profiles, see table A6 and A7 in Appendix A. Here, it is clear that even if the effects of interest or forgone interest are excluded, as well as excluding the accounts where a minimum balance is required to qualify for discounts on bank 9

10 charges, the banks remain in the same sequence. Capitec generally remains the cheapest, followed by FNB, Absa and Standard Bank, with Nedbank taking up the last position. In practice, Capitec would be even cheaper beating FNB s Smart Unlimited by a bigger margin because interest would be earned every month on the balance in the Capitec account; at 5% for balances below R and 4,25% for balances of R and above. This credit interest would offset or even exceed bank charges. However, bear in mind that different bank clients have different needs and different transaction patterns that do not necessarily correspond exactly with those used in this report s profiles. For example, for a person whose number of transactions greatly exceeds the number indicated in the transaction profiles used in the study, an account with a fixed monthly fee (a bundled or package option 6 ) and few other charges would be the cheapest. For someone with a much higher income, the quality of the bank s private banking services would probably be more important than the bank charges. Each individual should therefore do more in-depth research before deciding on a particular bank account. The preceding tables are broad guidelines only the rest of the report gives more detail. 1.1 Comparison of 2011 and 2012 s charges It is technically possible, yet difficult to compare bank charges of the two years. Several factors make these comparisons difficult, such as the fact that interest rates did not remain constant, and that the charges of some of a banks accounts may have increased while the charges of other accounts of the same bank may have decreased. Banks can also introduce new types of accounts while older types of accounts can be phased out. Banks sometimes intentionally and steeply raise the charges of certain accounts to put pressure on their existing clients to move to other accounts of the same bank. Taking all these factors into consideration is virtually impossible; however, if they are not taken into account, a comprehensive comparison of all accounts could be unfair and misleading. Instead of comparing all the changes to all the different accounts of the various banks, the following table compares only the accounts that are generally the cheapest of the various banks. In this way, a bank s clients can see at a glance whether they are still on the relevant bank s cheapest option, and whether it would not make sense to move to another account or 6 For example, FNB s Unlimited accounts or Absa s Value Bundle accounts. 10

11 a different bank now. These comparisons do not differentiate between transmission accounts and full-fledged current accounts. Accounts that require clients to maintain a minimum balance to qualify for discounts on bank charges are not included here. Table 1.4: Each bank s cheapest account in 2011 and Calculated as average of eight profiles without dishonour fees, with interest or forgone interest omitted. Cheapest account in 2011 Costs in 2011 Cheapest account in 2012 Costs in 2012 Difference Capitec Global One Account R66,00 Global One Account R55,50 -R10,50-15,9% FNB Smart - Unlimited R74,53 Smart - Unlimited R60,95 -R13,58-18,2% Absa Silver Package R148,14 Silver Value Bundle R91,05 -R57,09-38,5% Standard Classic Cheque - Bank Fixed fee R134,89 Achiever - Electronic R109,81 -R25,08 (Without amending stop orders) (R85,81) -18,6% Nedbank Savvy - Electronic R107,79 Savvy - Electronic R112,61 R4,82 4,5% From table 1.4 it is clear that big changes have occurred since the release of the previous report. With the exception of Nedbank, the cheapest accounts of the various banks have become even cheaper, with Absa taking the lead with a remarkable decrease of 38,5% (R57,09) in the average cost of a Silver Value Bundle account compared to the Silver Package account which, in general, used to be Absa s cheapest account in With the Achiever Electronic account Standard Bank improved its position and costs considerably compared to last year. This account would have competed even better with Absa had Standard Bank not charged a fee to create or amend a stop order 8 Read more about this fee in Section Many clients will not be affected by it and without this fee, the Achiever Electronic s average cost in table 1.4 would have been only R85,81 and not 7 Please note that the figures for 2011 were adjusted in order to be comparable with the figures for 2012, in view of the fact that minor changes have been made to the user profiles for the 2012 report. The figures for 2011 as they appear in this table are therefore not exactly the same as those published in the 2011 report. 8 Stop orders are regular payments in terms of which an account holder has a specific amount transferred monthly and on a specific date to a beneficiary. It differs from a debit order where the instruction to debit the account does not come from the account holder, but from the beneficiary and where the amount may also vary from month to month. 11

12 R109,81. It would have been in the third cheapest position instead of Absa s Silver Value Bundle. As in tables 1.1, 1.2 and 1.3, here too Nedbank this year finds itself in the most expensive position, with the Savvy Electronic account that is not as competitive in 2012 as it was in This does not really mean that Nedbank is very expensive, but simply shows how much cheaper the other banks, especially Absa and Standard Bank, have become since last year. There is only a small difference between Capitec s Global One account and FNB s Smart Unlimited account. One should, however, bear in mind that Capitec pays interest of 5% on balances below R and 4,25% on higher balances, while FNB pays no interest on any positive balance in the Smart Unlimited account. In this particular comparison, where the effect of interest was omitted, Capitec is actually adversely affected. 12

13 2. General observations about transferring a bank account Customers who are dissatisfied with the service or prices of service providers easily transfer their custom to another provider of similar products or services. Banks are apparently one of the exceptions to this principle. Transferring a bank account is generally regarded as being difficult, cumbersome, confusing and time-consuming. Consequently, people are less inclined to move their bank accounts, even if their bank does not offer good service at a reasonable price. It would appear as if bank clients prefer to shut their eyes and pay the charges rather than attempting to find out whether they can perhaps find a cheaper service elsewhere. Yet there are promising signs that South African bank clients are becoming more inclined to move their bank accounts. According to the Ernst & Young 2012 Global Consumer Banking Survey 9 39% of South African bank clients who participated in the survey indicated that they have already changed banks, and 13% indicated that they were planning to do so. The percentages in 2011 were 34% and 10%. For the past few years most banks have been intensively advertising that they will assist new clients with the process of transferring their accounts. Transferring debit orders, in particular, can be complex, and this is where banks say they offer a lot of assistance. However, as actual transfers of accounts do not fall within the scope of the research for this report, it was not possible to determine how efficient these services really are. Another aspect that is sometimes mentioned is that the new bank will transfer an existing overdraft and settle the outstanding amount with the previous bank. The research for this report did not consider whether this is indeed done in all cases and what the conditions of such an agreement are. It can be assumed that a client s credit risk is likely to be evaluated differently at the new bank. As has been mentioned here above, it is generally held that moving debit orders is the most difficult part of transferring a personal transactional account. Some service providers who are paid by means of a debit order tend to resist debit order transfers because they fear they will lose their existing point of contact with their client and also lose their regular payments. Complications can also arise if an employer is unable to transfer the salary deposit to the new account in time. Where debit orders do not move to the new account on time, or where the salary deposit or other regular payments do not move on time, dishonour fees may be 9 The survey was done via the Internet among 500 South Africans. It is available at _takes_control/$file/global_consumer_banking_survey_2012.pdf [Accessed on 1 October 2012.] 13

14 charged for rejected debit orders. These fees can amount to several hundred rand 10. If a debit order is used to pay for insurance or medical cover, a rejected transaction can also lead to the service provider suspending cover, possibly without the client's knowledge. The advice Solidarity obtained from industry insiders in this regard and which is contained in the Banking Association of South Africa s Code of Banking Practice, is that the client should, if possible, keep the old account active with a balance that is sufficient to cover debit orders until it has been definitely established that all automatic deposits and payments have been moved to the new account. The new bank will often waive any penalty fees on the new account in the first month or two, but the old bank will not necessarily be as understanding. This report does not deal with savings accounts in detail, as such accounts are transferred mainly for two reasons only: the effective returns earned by the balance and the level of access to the money. This information is generally very simple and easy to obtain, and therefore any bank client should be able to quickly gather the necessary information. Transferring mortgage loans, vehicle financing or any other kind of loan can be difficult, timeconsuming and expensive. Apart from possible penalty fees for early redemption of the old loan, there may be transfer fees and the new lender may charge an initiation fee as well. Another problematic aspect is that the new loan may not be granted at the same or a better rate of interest than the previous loan market conditions and the borrower s personal circumstances will probably no longer be the same as when the original loan was granted. It is however not necessary to move all other credit lines with the current account. Nothing prevents a customer from having a current account with one bank and credit or other products with another. Business finance and business banking services do not fall within the scope of this report either, since many aspects of these again depend on the particular circumstances of each business rather than on the specific characteristics of any specific bank. Most of the major banks also offer other services, such as credit cards, investment services, funeral policies, estate administration, life insurance and financial advice. These services are also too numerous and too complex to be compared in this report. Every bank client can 10 Capitec s fee is R4. On most of its accounts, Absa charges R60 which rises to R138 from the fourth such occurrence in a 12 month cycle. FNB s dishonour fees are identical to those of Absa on most of FNB s accounts. Standard Bank charges R115 and Nedbank s charge is R90 which rises to R115 from the fourth such occurrence in a 12 month cycle. 14

15 judge for her/himself which of the services the current bank offers are actually useful and then determine whether the new bank offers a similar service that is as good or better. Existing tools and calculators are available on the Internet for comparing bank charges and other financial products. However, users of these kinds of websites should always compare any results generated by the calculation tools of these websites with regard to bank charges with the official brochures and telephonic advice given by the banks, as the information on these websites is not always 100% correct or up to date. Nevertheless, these websites can be convenient tools to assist in the search for a new account or other financial products. Assessments of service quality and other aspects of banking services can also be found on these websites. The websites of most banks also have tools that can be used to compare the bank's own accounts with each other. It should not be unusual for one person to have different accounts at different banks or institutions. Few people buy all their groceries and other domestic goods at only one shop clothes are bought at one shop while food is bought at another shop (or shops), medicine at a pharmacy and electronic equipment at yet another shop, while books are often bought on the Internet. Although large supermarkets stock all the different products mentioned above, the specialisation of the other shops enables them to supply services or products at better prices or of a better quality. In the same way, bank clients can make use of different banks or other service providers on the basis of the prices or service quality of each provider for each specific product. According to the Ernst & Young survey the percentage of South African banking customers using more than one bank simultaneously has risen from 56% to 61% from 2011 to

16 3. Comparison between different banks and accounts The purpose of this study is not to pass comment on or criticise the fact that South African banks charge certain fees. Bank fees as a direct mechanism to recover the cost of transactional banking services are not necessarily worse than indirect mechanisms, such as using the cost of credit to cross subsidise transactional banking services. The present report is only a comparison of a few of the different options available to South African holders of transactional accounts. The main source of information for this comparison between different bank accounts is the banks' own websites. The banks' telephone helplines were also consulted to obtain greater certainty in cases where uncertainty existed. 11 Making use mainly of the banks' websites and telephone helplines provided a way of treating all banks the same way with regard to the accuracy and clarity of their websites and the accuracy and consistency of the information supplied on the telephone helplines. All the information used in the comparison is therefore the same information that is available to the general public. Throughout the report it was endeavoured to use the latest information and to convey it accurately. The information was collected from the electronic brochures on banks websites as each bank announced its charges for Certain banks made more than one adjustment to their tariff structures during the course of In those instances, the latest available information was used. In those cases where online information was unclear the information was verified by means of telephone calls to help lines. Slight inaccuracies could have occurred in the process of transferring the information, although accuracy was diligently pursued. For these reasons the information in this report must therefore not necessarily be viewed as an exact reflection of what would appear on the statement of a bank client holding any of the respective accounts there may have been changes after completion of the report, the brochures and helplines may have given incorrect information and errors could have occurred in transcribing and/or interpreting correct data. 11 Records were not kept of the number of telephone calls made and the duration of each call, but the combined duration of the phone calls amounted to several hours. In spite of the fact that the banks use ShareCall numbers, the costs associated with making phone calls of this duration would have been considerable for any ordinary bank client. It was not always clear whether the consultants at the call centres understood questions correctly or gave the right answers. Even when they consulted their supervisors, incoherent or contradictory answers were still sometimes received. 16

17 Solidarity and/or any related organisations or institutions are not using this report to give any of our members or any other readers of this report any financial advice. No recommendations concerning any specific banking product are made by the organisation(s) in question. Neither does Solidarity and/or any related organisations and institutions officially discourage anyone from using any specific bank product. Readers are encouraged, however, to consult the different banks (as well as banks and other institutions not dealt with in the report) and to obtain financial advice from them after studying the report. Readers are also advised to confirm any information contained in the report with the respective banks themselves before making a decision on a specific account or option. Only the so-called Big Four (Absa, First National Bank, Nedbank and Standard Bank) and Capitec were included in the comparison. There are several other commercial banks, cooperative banks and non-bank financial service providers competing with the five banks compared here. However, most of these institutions have a small geographic footprint, 12 offer limited services or focus on market segments that differ from those to which most of the Solidarity Movement's members and supporters belong. For these reasons only the abovementioned five banks were included. Only the charges for transactional accounts were compared. Products such as investment accounts, housing loans, vehicle financing or business accounts were not investigated, since the rates and benefits associated with transactions/accounts of this kind depend to a greater extent on personal circumstances and features and are not standardised to a high degree as in the case of charges for transaction accounts. Broadly speaking, there are two types of transactional accounts: transmission accounts without an overdraft facility and current accounts, which may offer an overdraft facility. Transmission accounts are generally marketed as cheaper alternatives to people with a lower income. As will become apparent later, this type of account often is anything but cheap. A relatively recent phenomenon is the difference between debit cards and so-called cheque cards. The latter functions much like a credit card and online purchases are possible using cheque cards. Some banks charge extra if clients prefer a cheque card instead of a debit card. In this comparison, the cheapest option was used throughout. 12 A number of smaller banks or service providers that do not have many branches of their own or other infrastructure use the established infrastructure of the large banks (like Absa). However, this arrangement does not signify ownership of the smaller banks by the large banks. 17

18 The various user profiles compiled are based on monthly expenditure 13 ranging from R7 500 to R and 12 to 29 specific transactions per month. People spending more than the upper level of R per month are probably more concerned about additional benefits such as a personal relationship manager than about bank charges. It does not mean that this report is of no use to such people, but people who fall within this group will have to investigate personally which bank suits their specific needs best. People spending less than R7 500 per month are probably interested mainly in the lowest bank charges, and can use the expenditure level of R7 500 and the banking charges for 12 transactions per month as a guide. The different user profiles (transaction combinations) drawn up are based on a set of criteria that generally corresponds to the recommendations made by banks on how to reduce bank charges. These principles are: As few cash withdrawals as possible and no cash or cheque deposits; Larger amounts and fewer transactions rather than many low-value transactions; As few physical visits to a branch as possible; Relatively little contact with ATMs; Use of SMS notification of activity on the bank account; No provision for an overdrawn account; No international transactions; No use of cheques; No use of a credit card; No use of a petrol card (garage card). The reason why overdrawn accounts and credit cards were omitted is that if the large number of different options, combinations, interest-free periods and interest rates available were included they could influence the results of the comparison too much 14. Garage cards were omitted because a very large number of filling stations, if not all of them, now also accept payment by debit cards (and ordinary credit cards), which makes a personal garage card unnecessary. There is a general trend towards using various types of electronic banking services and reducing personal contact with branches and even visits to ATMs. People who still personally 13 There is an important difference between monthly income and monthly expenditure. People can spend either more or less than their monthly income. 14 Nedbank for example offers around 30 different types of credit cards, each with its own interest rate and other conditions and perks. 18

19 issue and/or receive cheques and/or regularly deposit cash at a bank will have compile their personal usage patterns and make their comparisons themselves to determine the best alternative. The usage patterns used in this study do not make provision for this. 15 The cheaper option would be to make use of the new possibilities offered by Internet, telephone and cellphone banking services. Additional advantages that differ from one account to another, such as FNB's ebucks, Nedbank's Affinity programme and Absa Rewards, as well as aspects such as access to comfortable lounges at airports etc. are not taken into account in this study either, as their real value is impossible to quantify consistently. Access to a comfortable lounge at the airport may mean a lot to one person, whereas another person might never use it at all or might not mind sitting in the normal waiting area. It is impossible to quantify the subjective value different people may attach to such additional perks in a fair and relevant manner. It is therefore left to the readers of the report to make their own assessment with regard to features and benefits such as these. For each user profile two alternative profiles were also drawn up. In one alternative, provision is made for one penalty fee (dishonoured payment fee) which is charged when a debit or stop order cannot be honoured due to insufficient funds in the account. 16 In the other alternative, one cash withdrawal is made at the ATM of another bank, with the consequent higher (Saswitch) cost. These alternatives give an indication of how quickly bank fees can rise if the guidelines are not observed. For account options requiring that a set minimum interest-free balance must be kept in the account in order to get a rebate (discount) on bank charges, the interest income forgone was calculated and added to the total bank charges for the account. 17 This makes the comparison fairer. 18 In the case of Capitec s Global one account the highest balance that must be maintained on another account (namely R10, 000) in order to get a rebate was used to calculate the interest that would be earned in one month. This was subtracted from the 15 See Appendix B for information about the charges for cash or cheque deposits. 16 Keep in mind that only one such occurrence is provided for in the alternative profiles where a dishonour fee is charged, while it is more likely that the dishonour fee will be charged for each scheduled payment and probably more than once a month for each payment. For people who cannot afford to keep a buffer of cash in their current account, one late salary payment or unexpected expense could result in dishonour fees amounting to hundreds or even thousands of rand being charged. 17 Interest has been calculated on the applicable minimum balance required on the specific account, at the highest interest rate that can currently be earned on any current account, namely 4,25% on a balance of R or more at Capitec. 18 If Capitec alone is considered, this approach is, in fact, unfair towards Capitec, seeing that the bank pays interest of 5% on balances under R

20 banking charges to achieve a fairer comparison. In respect of Capitec s account the interest rate on a balance of R is 4,25%, which will accrue interest of R34,74 in one month. In the comparisons, the amount of interest is given in all cases so that readers who are of the opinion that they are unable to maintain such a balance, may see the adjustment in costs that is required. 19 In the case of the user profile where a penalty fee is taken into account, the effect of positive interest has been removed because a penalty is charged only if there are insufficient funds in the account. This implies that the required minimum balances to qualify for a rebate were not maintained. A further point to note is that the costs for accounts where there is no charge for the first few transactions per month are subject to adjustment depending on which transactions are concluded first. For example, if the first 10 transactions are free and 10 transactions are concluded for which the charge is R2,50 each, together with 10 transactions for which the charge is R10 each, then the monthly charges may vary drastically depending on which transactions are concluded first. If the R2,50 transactions are concluded first (and are therefore free), all the R10 transactions must be paid for and the total cost is R100. On the other hand, if the R10 transactions are concluded first, then they will be free and the total cost for that month will only be the R25 for the ten R2,50 transactions. In comparison, it was assumed throughout that transactions such as withdrawals and card payments take place earlier than stop orders and that stop orders take place earlier than debit orders. In this analysis, exceptional fees, such as for the replacement of lost cards or post-dated cheques that bounce, were not included. The inclusion of such fees, for which most clients will rarely be charged, would distort the monthly cost profiles. The user profiles are also based on relatively large amounts and relatively few transactions. In the profile where the monthly expenditure is R7 500, there are 11 transactions of R500 each and one transaction R If there were smaller amounts and more transactions, 19 It can be argued that interest income on the same amount (R10 000) should be brought into the calculation to enable comparison between other accounts on which no minimum balance applies but on which no interest on positive balances is earned either. For example, an individual who has an FNB Smart Cheque Unlimited account, but also has spare cash of R10 000, could invest that R in a separate savings account and earn interest on it as well Readers of the report may wish to deduct R34,74 from the bank charges of each relevant account (requiring no minimum balance nor paying any interest) to determine the comparable figure with other interest-bearing accounts. The opportunity costs of cash may also differ from person to person, depending on what else they could feasibly do with the cash in their bank accounts. 20 When the term transaction is used, it refers to an interaction with the bank. Someone who withdraws R500 cash at an ATM has completed one transaction, regardless of whether the R500 cash is then spent at different shops. 20

21 the bank charges would naturally be higher. The approach of few transactions and relatively large amounts was used to give banks the benefit of the doubt in the sense that the limits of their package options were generally adhered to. The package options are accounts where fixed monthly fees are paid in exchange for no bank charges on a certain number of allowed transactions. It was also decided not to make extensive comparisons of accounts for teenagers or young adults, students, older people or pensioners. Most of the banks do have accounts targeting specifically these groups and for which the charges are generally markedly lower than those for ordinary accounts. Younger and older people should, therefore, take the trouble to ask banks about products specifically designed for them. The terminology for the different transactions and account options have generally been retained as found on the banks' websites in order to prevent possible confusion when readers of the report consult the websites or banks for further information themselves. The banks are discussed in no specific order. 3.1 Capitec - general information and impressions Capitec is a relatively new bank that has made a name for itself in recent years. At the presentation of its latest financial results, the bank announced that its active clients now number 3,7 million an increase of 31% over the previous year. In 2004, the bank only had about account holders. It seems as if Capitec has started to shake off its image as micro lender. Capitec is an independent bank and is not owned or controlled by any of the other large banks. Capitec's product offering is the simplest of all the banks considered in the comparison. Riaan Stassen, the bank s 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. The bank therefore has only one transactional account, the Global One Account. In other words, clients are not segmented according to their level of income at all. The bank charges are also laid out clearly on the bank's website, and the bank's call centre operators are well informed and were able to answer enquiries about the account efficiently. 21

22 Capitec s fees were not changed in Some changes were made during 2012 with many fees that have been lowered, while some have been increased. The net effect was of these changes was to lower Capitec s bank costs compared to The limitations of the Capitec account are that it does not offer the option of a credit card, overdraft facility or cheque book. There is talk that Capitec will in future offer credit cards. It is possible though to have a Capitec account and to get a credit card from an external service provider. Capitec does now offer cell phone banking but the service is still somewhat limited. The bank s internet banking services are, however, at a good standard. Capitec focuses strongly on making it as simple, easy and paperless as possible for people to do their banking. Debit card transactions are free, and generally speaking internet banking services are very cheap in order to encourage people to use cash as little as possible. Capitec's ATM fees and cash withdrawal fees at cash registers in shops are also low. Although Capitec's ATM network is expanding, it is still not as extensive as the networks of most other banks. However, it is relatively cheap to draw money at another bank's ATM. Capitec charges a fixed fee of R4 per withdrawal at a Capitec ATM and a fixed fee of R7 per withdrawal at the ATM of another bank. To put this into perspective: An Absa client with the standard current account pays R9,35 to withdraw R500 at an Absa ATM, whereas a Capitec client pays only R7 to withdraw R500 at the same Absa ATM. It therefore costs the Capitec client less to use the Absa ATM than it costs Absa s own client on the standard fee option. Capitec's various penalty fees (such as the dishonour fee for a debit order that is dishonoured because of insufficient funds) are fixed at only R4,00 which, except for Absa s limited Transact account, are the lowest of all the fees of the different banks studied. A further feature of Capitec's transaction account is that the bank currently pays 5% interest on balances below R and 4,25% interest on balances exceeding R The interest is calculated daily and capitalised monthly. These rates are higher than those of many savings accounts at the other banks and this means that any cash left in the Capitec account accrues interest. Capitec's account is therefore suitable for people who do not need a cheque book or overdraft facility and who do not mind using an external provider's credit card. People who are able to maintain positive balances in their accounts are rewarded with interest, which has the potential to cover all bank fees on the account. 22

23 3.2 Absa - general information and impressions Absa is an established commercial bank with a wide range of accounts and options for clients. The brochure that is available on Absa's website features 13 different types of accounts, many of which also have more than one fee structure. Clients are segmented according to their level of income. During the course of 2012 Absa did simplify its product range somewhat. Absa also has around 13 old accounts and options which are still available to existing clients, but which are not available to new customers. These accounts were left out of the comparison. Absa's website is fairly user-friendly, but comparing accounts and tracing all relevant information on a specific account can be difficult, because the site has so many different pages and not all information about a specific account is necessarily summarised on one page. The website includes a calculator for calculating bank fees, but it is not easy to find on the website and it isn t very user friendly. It also does not seem to contain Absa s latest accounts and seems to have not been updated recently. Absa's call centre agents are generally well informed about the different accounts and fees, but when complex questions are asked about bank fees calls may take quite a while before a final answer is received. It is also not unusual to have to hold for another consultant who has more knowledge of a specific product than the person who first answered the call. Sometimes the information given by various agents differed from one to the other and from the information given in the bank s literature on the website. On most accounts Absa offers a complete banking service which includes an overdraft facility, credit card and cheque book. As with cheaper accounts that exclude some of these options are also offered. Absa does offer comprehensive internet, telephone and cell phone banking services. During the course of 2012 Absa has made far-reaching changes to its bank accounts and banking charges. Whereas a great many different options generally existed for each account in the past, Absa s present accounts are basically split into only two types. Firstly, there is the regular Pay as you transact option for which a specific fee is paid for each transaction. Secondly, there are the new Value Bundle options where a fixed monthly fee is charged and most of the transactions do not incur additional fees. These changes made Absa s fee structures far more user friendly than they used to be, and also tend to lower banking costs for most of the bank s clients. 23

24 Absa still offers a few specific options the charges of which are almost identical (for example the Platinum Value Bundle and the Potentiate EasyFee Option 2) and it is not clear why options which are almost identical are marketed as separate accounts. Such Absa accounts are however now in the minority, and as far as simplicity and clarity of bank charges are concerned the bank is moving in the right direction. Most of Absa s accounts have limitations based on income level. The Platinum Value Bundle account, for example, can only be used by people with a regular income of more than R per month. Except for two of the accounts investigated, Absa's penalty fees on dishonoured payments are R60 and increase to R138 from the fourth time the fee is charged in 12 months. This has remained unchanged from 2011, but has changed since 2010 when the fees were R100 rising to R125. There is also a fee of R57 which is charged each time the account is overdrawn without permission or the agreed limits are exceeded. For Absa's clients it is therefore very important to guard against any penalty fees, as they can accumulate quickly and can become very expensive. 3.3 First National Bank (FNB) - general information and impressions Like Absa, First National Bank also offers numerous different bank accounts and different options with different fee structures on most of its accounts. Comparisons of the different options and comparisons with other banks are therefore also fairly cumbersome and complex. FNB also segments clients by income levels. FNB's website is fairly user-friendly, and most of the information on each account is displayed on one page. While FNB s banking charges were outlined on the website itself in 2010 and 2011 these are now made available in a separate text document. This new approach makes comparing accounts and fees slightly more difficult than in the past, but it is still fairly user friendly. The bank s fee calculator is deeply hidden away within the website and whether an ordinary client will ever find it is doubtful. Overall, the information on FNB's website seems to be up to date. As in the case of most banks call centres, FNB's call centre consultants are generally well informed about the different accounts and fees, but when complex questions are posed, about bank fees calls may take quite a while before a final answer is received. 24

25 On most accounts FNB offers a complete banking service that includes an overdraft facility, credit card and cheque book. As at the other banks, there are also accounts which exclude some of these options and which are aimed at persons with a lower income. FNB offers comprehensive internet, telephone and cell phone banking services. Generally speaking, FNB appears to be innovative with regard to new technology. There are even some account options where the extras include internet data bundles and devices such as tablets and smart phones are included as part of the package. On many of FNB's accounts ebucks can also be earned (subject to certain requirements) that can be used at most internet-based retailers. FNB is also the only South African bank directly linked to PayPal, which simplifies international internet payments for FNB clients. FNB's free structure creates the impression that the bank wants to encourage clients to use electronic banking services rather than to do their banking at branches. For example, it costs at least R20 to deposit cash at an FNB branch, but for the same transaction at an ATM the minimum cost is R5,50. This is a common trend at all banks, but at FNB it seems to be more pronounced than at the others. The different options on FNB's current accounts can be set out as follows. Firstly, there are the Pay as you use options, where a relatively low monthly fee is paid but each transaction incurs its own fee. Secondly there is the Fee Saver option, where certain qualifying transactions are free if a certain minimum balance (R9 000 on most accounts) is kept in the account at all times. In 2010 the Fee Saver accounts offered only ten free transactions and in 2011 they offered only 35. However, it has now been increased to an unlimited number of transactions, with the exception of the Smart Fee Saver account which is still limited to only 10 transactions. For the purpose of a fee comparison, the Fee Saver option was used in most cases and not the basic Pay as you use option. Lastly FNB also has an Unlimited option for which a relatively high fixed fee is paid, but an unlimited number of qualifying transactions can be done free of charge. Like Absa FNB also applies income level restrictions to the various accounts. Anyone who wants to open a Platinum account, for example, must have an annual income of more than R and an annual income of R is required for a Gold account. FNB s Silver option was discontinued in Except for one of the accounts investigated, FNB's penalty fees for dishonoured payments are R60 and increase to R138 from the fourth time the fee is charged in 12 months. This is 25

26 identical to Absa s and has changed since 2011 when it was R105 and R130. A further aspect of many of FNB's accounts which requires clients to be alert is that FNB can allow certain transactions to succeed even if the overdraft limit is exceeded. Where FNB allows such a transaction to succeed, an honouring fee of R95 is charged (which increases to R120 from the fourth time in 12 months). This has increased from R90 (R115) in This fee is in addition to the fee of R57 which is charged each time the account is overdrawn without permission or the agreed limit is exceeded. Since 2012 FNB s exceptionally high fees charged when another bank s ATM is used, are a thing of the past. Its charges for using another bank s ATM are now more or less in line with those of the other members of the Big Four, although Capitec s fee for such a transaction still remains much lower than that of all the other banks. 3.4 Standard Bank - general information and impressions In 2012 Standard Bank has reduced the number of accounts it offers and has simplified them which makes analysis of the bank s charges easier than before. Segmentation according to income levels is also encountered at Standard Bank, with the toplevel cheque account, the Prestige Current Account, requiring a monthly income of at least R or an honours degree and an income of R Standard Bank does not have a very good website, which was also the case in 2010 and The menus and page layouts are often confusing, and it can take quite a while to access the correct information instead of a watered-down, incomplete exposition of the benefits of an account s features. Much of the information on the website seems to be outdated and there are quite a few dead links. The pages on the website with information on the fees generally contain most of the essential information, but sometimes inexplicable omissions occur. As is the rule at most banks, Standard Bank's call centre consultants are fairly well informed about the different accounts and fees, but when complex questions are put it may take quite a while before a final answer is received. Sometimes the consultants do not seem to be familiar with the terminology their own employer uses in its pricing literature. On most of its accounts Standard Bank offers a complete banking service that includes an overdraft facility, credit card and cheque book. As at the other banks, there are also cheaper 26

27 accounts that exclude some of these options. Standard Bank also offers comprehensive internet, telephone and cell phone banking services. Standard Bank offers a variety of different options on most current accounts. Firstly, there is the Pay as you transact option, where a relatively low monthly fee is paid but each transaction incurs an additional fee. What is interesting about Standard Bank's monthly fee for this option is that it is a minimum fee. For example, if the monthly fee is R50 and the combined fees of all the other qualifying transactions in the month come to R55, then the total bank charge is R55 and not R105. In other words, the total bank charge only increases to above the minimum fee if all the other fees together come to more than the minimum fee. Secondly, Standard Bank has an option where a relatively high fixed fee is charged in exchange for a certain number of free transactions. This is called the Fixed Fee or Plus option. Thirdly there is also a rebate option where bank charges for certain transactions are reversed if certain minimum balances are kept in the account at all times (interest free). Unlike similar options offered by FNB, the rebate is not linked to the number of transactions, but is a specific amount of money. A maximum rebate of R85 can for example be received if a balance of R to R is kept in the account. It works on a stepped scale, with the rebate increasing as the minimum balance increases. In some cases, however, the forgone interest is nearly as much as the discount that can be received; for example, if R is maintained in the account interest-free, the maximum rebate is R85, but interest of R69,49 could have been earned if this amount was invested at 4,25%. Except for one of the accounts investigated, Standard Bank's penalty fee for a failed payment is R115. This has remained unchanged since According to a telephone helpline consultant this fee does not increase if more than three such events occur within 12 months, as it does at other members of the Big Four. There is also an honouring fee for transactions that exceed the limits but are nevertheless allowed by the bank. In Standard Bank's case this fee is R120 per item, also unaltered since Like in the case of the other major banks there is also a fee of R57 which is charged each time the account is overdrawn without permission or the agreed limit is exceeded. 27

28 3.5 Nedbank general information and impressions Nedbank offers a somewhat smaller range of accounts and options than the other members of the Big Four. As a result, the bank's product offering is easier to understand. It also does not seem as though Nedbank segments its clients by income level to the same extent as at other members of the Big Four. The only qualifying criterion for the top level current account, the Nedbank Current Account, is an age of at least 25 and a monthly income of R3 000 or more. However, Nedbank does have a private banking department for high income clients. Nedbank's website is fairly user-friendly. One problem that was experienced in 2010 s analysis was that although the electronic brochure stated that it was the 'full brochure', it did not list all the possible fees. It was therefore necessary in 2010 to use the telephone helpline to obtain some of the information which other banks provided on their websites. In 2011, the situation had improved and the information on the website was much more extensive. This trend continued in Nedbank's website does have a useful calculation tool for bank charges, although it does not include all possible fees. Nedbank's consultants are fairly well informed about the different accounts and bank charges. As is also the case at most banks, however, it may take a long time to get the final, complete answer to complex questions and when asked complex questions consultants immediately sounded unsure of themselves. As mentioned earlier, Nedbank offers a smaller variety of accounts and options than most of the other banks. There are three types of accounts for mainstream clients. Firstly, there is a basic option that comes without extras such as credit cards and overdraft facilities. Secondly, there are bundle options where a fixed fee is paid in exchange for an unlimited number of free qualifying transactions, although fees are still levied on some transactions. Thirdly, there is the standard current account where separate fees are charged for each transaction. Except for the one cheaper account, Nedbank's penalty fees for failed payments start at R90 (in 2011 it was R85) and increase to R115 from the fourth event in 12 months. As at FNB and Standard Bank, there is also an honouring fee for transactions that exceed the limits but are nevertheless allowed by the bank. At Nedbank this fee is R90 per event. However, according to the telephone helpline, no additional fee is charged when the account becomes overdrawn without permission or if the agreed limit is exceeded. 28

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30 4. Comparison of bank accounts according to different user profiles In the preceding section the general principles on which the user profiles were drawn up and the different accounts of the different banks were selected for comparison were explained. The user profiles have been slightly altered since the 2011 report. The historical data for 2011 were adjusted to take these slight alterations into account wherever comparisons between 2011 and en 2012 are made in the report. The exact changes can easily be determined by comparing the user profiles here below to those in the 2011 report. In brief, the changes are that the cost of an archived bank statement on the internet is not included any more, and in the case of user profiles where an ATM withdrawal at another bank s ATM is included, a slightly different approach was used. A slight change has also been made to the way in which SMS notifications are handled. None of the abovementioned changes has a significant impact on the report s results. An attempt was made to present a good reflection of each bank's total product offering to the average client and/or the average trade union member. This does not include students or youths, older people or people with a very high income. In each instance, all the accounts are displayed in the accompanying graph and a number of accounts on each profile are presented in sequence ranging from the cheapest to the most expensive in the table that follows after the graph. 30

31 4.1 User profile one R7 500 per month This profile is aimed at people who spend relatively little per month and who do fairly few transactions per month. A lower amount was not used, because the bank charges for a person spending less than R7 500 per month will generally not differ significantly from the charges at the R7 500 level, since the number of transactions cannot be much fewer. The abbreviation IB refers to Internet banking and the abbreviation POS refers to point of service (such as a till in a shop). The transactions of the R7 500 profile are as follows: Transaction type No. of transactions Monthly admin fee 1 Debit or cheque card purchase (POS) (R500) 2 Cash withdrawal at till point (R500) 2 Own ATM balance enquiry 1 SMS update subscription 1 SMS update (per SMS) 12 Internet banking subscription 1 IB payment to other account (R500) 1 IB payment to other account (R2 000) 1 IB balance enquiry 1 IB SMS notification 2 IB amend stop order 1 IB stop order (internal) (R500) 1 IB stop order (external) (R500) 2 Debit order (internal) (R500) 1 Debit order (external) (R500) 2 31

32 The profile in which one dishonour fee (penalty fee) is included is, except for this one alteration, otherwise identical to this profile. As previously explained, the effect of interest or forgone interest due to the maintenance of a minimum balance is also excluded from the profile with the dishonour fee. It is excluded because the fact that a dishonour fee is charged implies that the minimum balance was not maintained. In the profile where one ATM withdrawal at another bank's ATM is included, one cash withdrawal at till point is replaced with this Saswitch ATM transaction. The rest of the transactions are identical to the basic profile. Bear in mind that except in the profile with the dishonour fee, the effect of the interest forgone when an interest-free minimum balance is maintained, is included, as well as the effect of maintaining a balance of R in Capitec s account. The positive interest is shown on the graphs. The amount of R34,74 can therefore simply be added to Capitec s values on the graphs and in the tables to see that the cost would have been if all interest were to be left out of the equation. 32

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34 The cheapest account on this basic profile is Capitec s account, with a repayment of R4,64 (owing to the effect of interest on a balance of R10 000), followed by FNB s Smart Pay as you use Fee Saver account with charges of R19,47. However, this particular FNB account is only cheap when few transactions are made since discount is only given on ten transactions per month. The cheapest account which does not require that a minimum balance be kept is, after Capitec, the FNB Smart Unlimited account. R7 500 expenditure per month no penalties (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) (payback) R4,60 FNB Smart - P.a.y.u. (Fee saver) R19,47 FNB Smart Cheque - P.a.y.u. (Fee saver) R33,37 FNB Gold - P.a.y.u. (Fee saver) R33,37 FNB Platinum - P.a.y.u. (Fee saver) R33,37 FNB Smart - Unlimited R51,10 Standard Bank Elite - Refund R52,44 Nedbank Transactor Plus - Bundle R72,40 Absa Silver Value Bundle R80,50 FNB Smart Cheque - Unlimited R81,10 34

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36 Capitec still remains the cheapest account when the effect of one penalty is included and the effect of positive interest or forgone interest is ignored. In these conditions Capitec's total bank charges are R34,10. (The drastic change is mainly the result of the assumption that no interest is earned, as the penalty in Capitec's case amounts to only R4,00.) Capitec is followed by FNB's Smart Unlimited option with R56,10. This scenario shows the dramatic effect of a single penalty (and in the case of FNB s Fee Saver accounts, as well as Standard Bank s Refund account the accompanying loss of a rebate on a certain number of transactions) on bank charges. R7 500 expenditure per month one penalty (interest or forgone interest not included) Bank Account and option Costs Capitec Global One (No interest) R34,10 FNB Smart - Unlimited R56,10 FNB Smart - P.a.y.u. (Fee saver) R77,10 Absa Flexi R90,90 FNB Smart - Zero monthly fee R91,60 Nedbank Transactor Plus - Bundle R100,40 Nedbank Transactor Plus - P.a.y.u. R115,50 Absa Silver Value Bundle R140,50 FNB Smart Cheque - Unlimited R141,10 Absa Current - Standard fee R150,00 36

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38 When the effect of one withdrawal at another bank s ATM (Saswitch withdrawal) is taken into account, the monthly bank charges increase by an average of almost 19%. Capitec remains the cheapest with R1,36, followed by FNB's Smart P.a.y.u. Fee Saver account with R31,97. R7 500 expenditure per month no penalties, one external ATM (interest or forgone interest included) Bank Account and option Costs Capitec Capitec - Global One (R34,74 interest) R1,36 FNB Smart - P.a.y.u. (Fee saver) R31,97 FNB Smart Cheque - P.a.y.u. (Fee saver) R45,87 FNB Gold - P.a.y.u. (Fee saver) R45,87 FNB Platinum - P.a.y.u. (Fee saver) R45,87 FNB Smart - Unlimited R63,60 Standard Bank Standard Bank - Elite - Refund R67,89 Nedbank Nedbank - Transactor Plus - Bundle R81,90 FNB Smart Cheque - Unlimited R93,60 Absa Silver Value Bundle R95,85 On the R7 500 user profiles Capitec is the cheapest overall, followed by FNB. However, the Fee Saver accounts of FNB are those which most often emerge as the cheapest and it has to be borne in mind that these accounts require that a minimum balance of R5 000 (Smart) or R9 000 are kept in the account at all times to qualify for the discount. Apart from these accounts, only FNB s Smart Unlimited and Smart Cheque Unlimited stand out. Apart from the Elite (Refund) account in which a R balance has to be maintained, Standard Bank does not offer much value at this level. Nedbank s Transactor Plus (Bundle) account and Absa s Silver Value Bundle are not really competitive at this level either. 38

39 4.2 User profile two R per month The abbreviation IB means Internet banking and the abbreviation POS refers to point of service (pay point, such as a till in a shop). The transactions of the R profile are as follows: Transaction type No. of transactions Monthly admin fee 1 Debit or cheque card purchase (POS) (R500) 3 Cash withdrawal at till point (R500) 2 Own ATM balance enquiry 1 SMS update subscription 1 SMS update (per SMS) 17 Internet banking subscription 1 IB payment to other account (R500) 2 IB payment to other account (R2 000) 1 IB balance enquiry 1 IB SMS notification 3 IB amend stop order 1 IB stop order (internal) (R500) 1 IB stop order (external) (R500) 2 IB stop order (external) (R1 000) 1 Debit order (internal) (R500) 3 Debit order (external) (R500) 2 The profile in which one dishonour fee (penalty fee) is included is otherwise identical to this profile. As was explained in the previous section, the effect of interest or forgone interest due to the maintenance of a minimum balance is also excluded from the profile with the dishonour fee. It is excluded because the fact that a dishonour fee is charged implies that the minimum balance was not maintained. 39

40 In the profile where one ATM withdrawal at another bank's ATM is included, one cash withdrawal at till point is replaced with this Saswitch ATM transaction. The rest of the transactions are at identical to the basic profile. Bear in mind that except in the profile with the dishonour fee, the effect of the interest forgone when an interest-free minimum balance is maintained, is included, as well as the effect of maintaining a balance of R in Capitec s account. The positive interest is shown on the graphs. The amount of R34,74 can therefore simply be added to Capitec s values on the graphs and in the tables to see that the cost would have been if all interest were to be left out of the equation. 40

41 41

42 Overall, Capitec is still the cheapest on this profile, with a total monthly cost of R6,76. It is followed by FNB s Smart Cheque, Gold Cheque and Platinum accounts, all on the P.a.y.u. (Fee Saver) option at R34,42. The second cheapest account which does not require a minimum balance to be kept is again, after Capitec, FNB s Smart Unlimited account. R expenditure per month no penalties (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) R6,76 FNB Smart Cheque - P.a.y.u. (Fee saver) R34,42 FNB Gold - P.a.y.u. (Fee saver) R34,42 FNB Platinum - P.a.y.u. (Fee saver) R34,42 FNB Smart - P.a.y.u. (Fee saver) R46,22 FNB Smart - Unlimited R52,15 Standard Bank Elite - Refund R65,79 Absa Silver Value Bundle R81,25 FNB Smart Cheque - Unlimited R82,15 Nedbank Transactor Plus - Bundle R93,10 42

43 43

44 As was the case with the R7 500 profile, the inclusion of a penalty fee causes a drastic increase in bank charges. Capitec remains the cheapest at R45,50. It is followed by FNB s Smart Unlimited option at R57,15. R expenditure per month one penalty (interest or forgone interest not included) Bank Account and option Costs Capitec Global One (No interest) R45,50 FNB Smart - Unlimited R57,15 FNB Smart - P.a.y.u. (Fee saver) R99,15 Absa Flexi R111,65 FNB Smart - Zero monthly fee R119,65 Nedbank Transactor Plus - Bundle R121,10 Nedbank Transactor Plus - P.a.y.u. R139,75 Absa Silver Value Bundle R141,25 FNB Smart Cheque - Unlimited R142,15 FNB Gold - Unlimited R160,15 44

45 45

46 On this profile, Capitec is once again the cheapest, with a monthly cost (including interest of R34,74) of R12,76. It is followed by FNB s Smart Cheque, Gold Cheque and Platinum Cheque accounts, all on the P.a.y.u.(Fee Saver) option, with charges at R46,92. In second place after Capitec the cheapest account where no minimum balance needs to be maintained is again FNB s Smart Unlimited account R expenditure per month no penalties, one external ATM (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) R12,76 FNB Smart Cheque - P.a.y.u. (Fee saver) R46,92 FNB Gold - P.a.y.u. (Fee saver) R46,92 FNB Platinum - P.a.y.u. (Fee saver) R46,92 FNB Smart - P.a.y.u. (Fee saver) R58,72 FNB Smart - Unlimited R64,65 Standard Bank Elite - Refund R72,49 FNB Smart Cheque - Unlimited R94,65 Absa Silver Value Bundle R96,60 Standard Bank Achiever - Electronic R106,50 Overall, on the R user profiles Capitec was again the cheapest, followed by FNB in the second place. However, the cheapest FNB s accounts are again the Fee Saver accounts. It has to be borne in mind that these accounts require a minimum balance of R5 000 (Smart) or R9 000 to qualify for the discounted fees. Apart from these only FNB s Smart Unlimited and Smart Cheque Unlimited accounts stand out. At this level, Absa s Silver Value Bundle and Standard Bank s Achiever Electronic account are also starting to become competitive. Nedbank still has no account that competes well at this level. 46

47 4.3 User profile three R per month The abbreviation IB means Internet banking and the abbreviation POS refers to point of service (pay point, such as a till in a shop). The transactions of the R profile are as follows: Transaction type No. of transactions Monthly admin fee 1 Debit or cheque card purchase (POS) (R500) 4 Debit or cheque card purchase (POS) (R1 000) 1 Cash withdrawal at till point (R500) 1 Own ATM (R1 000) 2 Own ATM balance enquiry 1 SMS update subscription 1 SMS update (per SMS) 26 Internet banking subscription 1 IB transfer to other account (R500) 4 IB transfer to other account (R2 000) 1 IB balance enquiry 1 IB SMS notification 5 IB amend stop order 2 IB stop order (internal) (R500) 2 IB stop order (external) (R500) 2 IB stop order (external) (R1 000) 2 Debit order (internal) (R500) 4 Debit order (internal) (R1000) 1 Debit order (external) (R500) 2 The profile in which one dishonour fee is included is otherwise identical to this profile. As explained in the previous section, the effect of interest or forgone interest due to a minimum balance being maintained is also excluded from the profile with the dishonour fee. 47

48 In the profile where one ATM withdrawal at another bank's ATM is included, one own ATM withdrawal (R1 000) is replaced by this Saswitch ATM transaction. The rest of the transactions are identical to the basic profile shown above. Bear in mind that except in the profile with the dishonour fee, the effect of the interest forgone when an interest-free minimum balance is maintained, is included, as well as the effect of maintaining a balance of R in Capitec s account. The positive interest is shown on the graphs. The amount of R34,74 can therefore simply be added to Capitec s values on the graphs and in the tables to see that the cost would have been if all interest were to be left out of the equation. 48

49 49

50 The pattern remains unchanged in this scenario. Capitec is the cheapest, with charges of R It is followed by FNB s Smart Cheque, Gold Cheque and Platinum Cheque accounts, all of them on the P.a.y.u.(Fee Saver) option, with costs of R36,52. After Capitec, the cheapest account which does not require a minimum balance is again FNB s Smart Unlimited account. R expenditure per month no penalties (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) R31,66 FNB Smart Cheque - P.a.y.u. (Fee saver) R36,52 FNB Gold - P.a.y.u. (Fee saver) R36,52 FNB Platinum - P.a.y.u. (Fee saver) R36,52 FNB Smart - Unlimited R54,25 Absa Silver Value Bundle R82,75 FNB Smart Cheque - Unlimited R84,25 FNB Smart - P.a.y.u. (Fee saver) R86,82 Nedbank Savvy Electronic - Bundle R98,15 FNB Gold - Unlimited R102,25 Standard Bank Achiever - Electronic R108,75 50

51 51

52 This is the first profile where Capitec does not emerge as the cheapest. The main reason for this is the unrealistic assumption that the Capitec account balance will be R0 for the whole month and therefore will not earn any interest. In this instance it works in the favour of the other accounts. The cheapest account on this user profile is FNB s Smart Unlimited account at R59,25, followed by Capitec s account at R70,40. After these two accounts there is a large gap until Absa s Silver Value Bundle at R142,75. R expenditure per month one penalty (interest or forgone interest not included) Bank Account and option Costs FNB Smart - Unlimited R59,25 Capitec Global One (No interest) R70,40 Absa Silver Value Bundle R142,75 FNB Smart Cheque - Unlimited R144,25 FNB Smart - P.a.y.u. (Fee saver) R159,35 FNB Gold - Unlimited R162,25 Nedbank Transactor Plus - Bundle R170,50 Absa Flexi R170,80 Absa Gold Value Bundle R172,75 FNB Platinum - Unlimited R185,25 52

53 53

54 Here too Capitec is the cheapest at R34,66. It is followed by FNB s Smart Cheque, Gold and Platinum accounts all of which on the P.a.y.u. (Fee Saver) option, with costs of R55,02. After Capitec, the cheapest account with no minimum balance required is again FNB s Smart Unlimited account. R expenditure per month no penalties, one external ATM (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) R34,66 FNB Smart Cheque - P.a.y.u. (Fee saver) R55,02 FNB Gold - P.a.y.u. (Fee saver) R55,02 FNB Platinum - P.a.y.u. (Fee saver) R55,02 FNB Smart - Unlimited R72,75 FNB Smart - P.a.y.u. (Fee saver) R98,32 FNB Smart Cheque - Unlimited R102,75 Absa Silver Value Bundle R103,60 FNB Gold - Unlimited R120,75 Standard Bank Achiever - Electronic R129,45 Nedbank Savvy Electronic - Bundle R129,65 On the R user profiles Capitec is still in most instances the cheapest, followed by FNB. Of FNB s accounts the Fee Saver accounts (which require minimum balances) are still the cheapest. Apart from these it is only FNB s Smart Unlimited and Smart Cheque Unlimited which are prominent. Absa s Silver Value Bundle starts to compete well at this level. When it is borne in mind that Standard Bank s Achiever Electronic account includes two stop order changes of R16 each on the R user profile something which may not affect many clients then the Achiever Electronic also offers strong competition for Absa and FNB (See Section for more information in this regard). Nedbank s Savvy Electronic account is finally also becoming slightly more competitive, but still remains more expensive than the others. 54

55 4.4 User profile four R per month The abbreviation IB means Internet banking and the abbreviation POS refers to point of service (pay point, such as a till in a shop). The transactions of the R profile are as follows: Transaction type No. of transactions Monthly admin fee 1 Debit or cheque card purchase (POS) (R500) 4 Debit or cheque card purchase (POS) (R1 000) 1 Cash withdrawal at till point (R500) 1 Own ATM (R1000) 3 Own ATM balance enquiry 1 SMS update subscription 1 SMS update (per SMS) 29 Internet banking subscription 1 IB payment to other account (R500) 4 IB payment to other account (R1 000) 1 IB payment to other account (R2 000) 1 IB balance enquiry 1 IB SMS notification 6 IB amend stop order 2 IB stop order (internal) (R500) 2 IB stop order (external) (R500) 2 IB stop order (external) (R1 000) 2 IB stop order (external) (R2 000) 1 Debit order (internal) (R500) 2 Debit order (internal) (R1 000) 2 Debit order (internal) (R5 000) 1 Debit order (external) (R500) 1 Debit order (external) (R5 000) 1 55

56 The profile in which one dishonour fee is included is otherwise identical to this profile. As previously explained, the effect of interest or forgone interest due to the maintenance of a minimum balance is also excluded from the profile with the dishonour fee. In the profile where one ATM withdrawal at another bank's ATM is included, one ATM withdrawal (R1 000) is replaced by this Saswitch ATM transaction. The rest of the transactions are identical to the basic profile shown above. Bear in mind that except in the profile with the dishonour fee, the effect of the interest forgone when an interest-free minimum balance is maintained, is included, as well as the effect of maintaining a balance of R in Capitec s account. The positive interest is shown on the graphs. The amount of R34,74 can therefore simply be added to Capitec s values on the graphs and in the tables to see that the cost would have been if all interest were to be left out of the equation. 56

57 57

58 Here, Capitec falls slightly behind FNB s Fee Saver accounts, with Capitec s charges being R40,26 and the FNB Fee Saver accounts fees all being R37,57. The cheapest FNB account which does not require a minimum balance is again the Smart Unlimited account. R expenditure per month no penalties (interest or forgone interest included) Bank Account and option Costs FNB Smart Cheque - P.a.y.u. (Fee saver) R37,57 FNB Gold - P.a.y.u. (Fee saver) R37,57 FNB Platinum - P.a.y.u. (Fee saver) R37,57 Capitec Global One (R34,74 interest) R40,26 FNB Smart - Unlimited R55,30 Absa Silver Value Bundle R83,50 FNB Smart Cheque - Unlimited R85,30 Nedbank Savvy Electronic - Bundle R98,85 FNB Gold - Unlimited R103,30 FNB Smart - P.a.y.u. (Fee saver) R108,87 Standard Bank Achiever - Electronic R109,60 58

59 59

60 At R60,30 FNB s Smart Unlimited account takes first place on this profile, followed by Capitec at R79,00. They are followed by Absa s Silver Value Bundle. R expenditure per month one penalty (interest or forgone interest not included) Bank Account and option Costs FNB Smart - Unlimited R60,30 Capitec Global One (No interest) R79,00 Absa Silver Value Bundle R143,50 FNB Smart Cheque - Unlimited R145,30 FNB Gold - Unlimited R163,30 Absa Gold Value Bundle R173,50 FNB Platinum - Unlimited R186,30 FNB Smart - P.a.y.u. (Fee saver) R186,40 Nedbank Savvy Electronic - Bundle R188,85 Nedbank Transactor Plus - Bundle R189,80 60

61 61

62 On this profile Capitec is again the cheapest at R43,26. Capitec is again followed by FNB s Smart Cheque, Gold Cheque and Platinum Cheque accounts, all on the P.a.y.u. (Fee Saver) option, with costs of R56,07. Apart from Capitec, the cheapest account which does not require a minimum balance is once again FNB s Smart Unlimited account. R expenditure per month no penalties, one external ATM (interest or forgone interest included) Bank Account and option Costs Capitec Global One (R34,74 interest) R43,26 FNB Smart Cheque - P.a.y.u. (Fee saver) R56,07 FNB Gold - P.a.y.u. (Fee saver) R56,07 FNB Platinum - P.a.y.u. (Fee saver) R56,07 FNB Smart - Unlimited R73,80 FNB Smart Cheque - Unlimited R103,80 Absa Silver Value Bundle R104,35 FNB Smart - P.a.y.u. (Fee saver) R120,37 FNB Gold - Unlimited R121,80 Standard Bank Achiever - Electronic R130,30 Nedbank Savvy Electronic - Bundle R130,35 Even on the R user profiles Capitec is still generally the cheapest. Capitec is again followed by FNB s Fee Saver accounts with minimum balance requirements. These are nevertheless closely followed by FNB s Smart Unlimited and Smart Cheque Unlimited accounts which also compete well at this level. Absa s Silver Value Bundle competes even better at this level than on the R level. So too does Standard Bank s Achiever Electronic, especially when considering that it contains two stop order changes of R16 each on the R user profile (See Section for more information in this regard).nedbank s Savvy Electronic account remains more expensive than the competition. 62

63 4.5 General impressions from the cost comparison Costs of transmission accounts Transmission accounts such as Absa s Flexi Account, Nedbank s Transactor Plus and FNB s Smart account are often marketed as cheap accounts suited to clients with a low income. The comparison done in this regard shows that this is not always the case. Of the accounts analysed only Capitec s Global One and FNB s Smart transmission accounts are actually cheap Capitec Capitec s transmission account, being its only account, is necessarily the cheapest Capitec account in all cases. Apart from three profiles, it is also the cheapest account on all the profiles overall. The average cost of a Capitec account on the eight profiles without penalty fees amounts to R20,76 per month 21.This is R6,49 lower than last year, despite the fact that the interest rate on a positive balance dropped from 4,75% to 4.25%. If interest is not included in the calculation, the average cost on the same eight profiles would be R55,50 per month, R10,50 less than what it was in Costs of the Capitec Global One Account for different profiles R7 500 R R R Basic (payback) R4,64 R6,76 R31,66 R40,26 One penalty R34,10 R45,50 R70,40 R79,00 One other ATM R1,36 R12,76 R34,66 R43,26 Costs of the Capitec Global One Account for different profiles Excluding the effect of positive interest (R34,74 per month on R10 000) R7 500 R R R Basic R30,10 R41,50 R66,40 R75,00 One penalty R34,10 R45,50 R70,40 R79,00 One other ATM R36,10 R47,50 R69,40 R78,00 Only on the last profile, with a relatively large number of transactions, does Capitec lose its place as far and away the cheapest account. 21 Positive interest of R34,74 on a balance of R is included. 63

64 Absa Apart from two profiles that include a penalty fee, Absa s Flexi transmission account is never the cheapest account offered by Absa. This was also the case in Even when the penalty fee is added, the Flexi account is only the cheapest on the two lowest profiles, despite the fact that the penalty fee on a Flexi account is only R5 in comparison with the other accounts where penalty fees start at R60 and may increase to R138, apart from the Current Standard Fee Account which starts at R36 and may increase to R50. The average cost of the Flexi account on the eight profiles without penalty fees amount to R141,48. This is R35,99 lower than the 2011 average of R177,47. This decrease is commendable but is still not sufficient to make the Flexi account competitive. Costs of the Absa Flexi Account on different profiles R7 500 R R R Basic R85,90 R106,65 R165,80 R190,05 One penalty fee R90,90 R111,65 R170,80 R195,05 One other ATM R97,40 R118,15 R171,80 R196, FNB FNB s Smart Unlimited transmission account is in all instances FNB s cheapest account apart from the respective Fee Saver accounts which require a minimum balance of R5 000 or R9 000 in order to receive a discount on certain transactions. FNB can therefore justifiably market the Smart Unlimited account as a cheap account for people with low income. The average cost of this account on the eight transaction profiles without penalty fees is R60,95. It is R13,58 lower than it was in Costs of the FNB Smart Unlimited Account on different profiles R7 500 R R R Basic R51,10 R52,15 R54,25 R55,30 One penalty fee R56,10 R57,15 R59,25 R60,30 One other ATM R63,60 R64,65 R72,75 R73,80 The Smart account is also available on a Zero Monthly Fee option. This option is only suited to someone who hardly does any transactions. While it is the case that this account does not 64

65 incur a monthly fee, the other fees are so much higher than the normal fees that it very quickly becomes more expensive than the other options Standard Bank Since 2012 Standard Bank no longer offers a transmission account as part of its normal product offering. Clients with the E-Plan account are able to retain it if they want to, but it is not available to new clients. Standard Bank consolidated all its cheap accounts into the new AccessAccount, which is only available at Standard Bank s Loan Centres and Mobile Sales Agents. This account is analysed in section 5 of the report Nedbank In 2012 Nedbank split the Transactor Plus transmission account into two different options. As in the past, there is a Pay as you transact option, but in addition, there is now a Bundle option in terms of which eight qualifying transactions are free. In seven of the 12 user profiles, this Transactor Plus Bundle option is the cheapest account offered by Nedbank, while the normal Transactor Plus P.a.y.t. account is the second cheapest on four profiles. However, these accounts are never much cheaper than the Savvy Electronic account, and are also outperformed by that account in the higher user profiles. The Transactor Plus P.a.y.t. transmission account s average costs on the eight profiles without penalty fees was R134,75 in In 2012, the average costs of the new Transactor Plus Bundle account amounted to R124,29 and that of the ordinary Transactor Plus P.a.y.t. account amounted to R151, Conclusion on transmission accounts As was the case in 2010 and in 2011, the mere fact that a bank markets an account as being cheap does not necessarily mean that it is the option on which the bank charges will be the lowest. The cheap transmission accounts are actually the cheapest only in a few cases at FNB and in even fewer cases at Nedbank. On an overall sliding scale, Capitec s transmission account is the cheapest, followed by FNB, Nedbank, and Absa. The transmission accounts of both Absa and Nedbank are far more expensive than their competition at Capitec and FNB. 65

66 4.5.2 Costs of current accounts Absa Absa s far-reaching changes to its accounts and costs are yielding results. The name of the Value Bundle accounts is appropriate because these accounts are truly offering better value than the previous Package accounts offered by the bank. In almost all the profiles Absa s new Silver Value Bundle is the bank s cheapest option. With a fixed fee of R79 per month, which includes almost all of the frequent transactions, this account competes well with similar offers from the other banks. For example, it costs more or less the same as FNB s Smart Cheque Unlimited account, while Absa s Gold and Platinum Value Bundles compete directly with FNB s Gold and Platinum Unlimited accounts. Whereas Absa s bundle account options were not at all competitive in 2010 and 2011, the situation has now improved significantly. The new Value Bundles are not really directly comparable with Absa s old Package accounts, but it is still of interest to compare the costs. Depending on the profile, the Silver Value Bundle is 28% to 53% cheaper than the Silver Package of The Gold Value Bundle is 27% to 33% cheaper than the Gold Package of 2011, and the Platinum Value Bundle is 18% to 23% cheaper than 2011 s Platinum Package. Absa s Value Bundles also offer certain additional types of discount which have not been taken into account in this comparison, but which are nonetheless worth mentioning. Unused cash deposits and ATM withdrawals are carried over to the next month. If certain minimum balances are maintained, a discount worth a few rand can be obtained. Furthermore, discount is offered for a spouse who also has an Absa account. An account holder who has an Absa credit card does not have to pay the normal credit card charges (R14, R18 or R39, depending on the type of card). Account holders also get a small rebate if the account holder also has a mortgage bond with Absa. Discount can also be obtained if certain minimum balances are maintained, although the opportunity cost of forgone interest exceeds the discount, unlike FNB s Fee Saver and Standard Bank s Refund options. All of these additional aspects will not be meaningful to all account holders, but for those who already qualify for such perks, it can lower bank charges considerably. On the Silver Value Bundle account all of these discounts could, put together, amount to R63,50 per month quite a significant amount. 66

67 Absa still offers the normal type of accounts where a relatively low monthly service fee is charged, but where every single transaction is charged for. These accounts have now become almost redundant save for a person who performs almost no transactions. On the basic R7 500 per month profile, where only 12 transactions are performed per month, the Current Account Standard Fee account s total bank charges are R114,00 compared to the Silver Value Bundle s R80,50 and the Gold Value Bundle s R110,50. Clients who still have the normal accounts or the old Package accounts may well consider moving to one of the new Value Bundles FNB In six of the eight transaction profiles without penalty fees, FNB s cheapest accounts are the Smart Cheque, Gold and Platinum accounts on the Pay as you use (Fee Saver) option. This option is however not suitable for all clients as it requires a minimum balance of R9 000 at all times in order to qualify for free transactions. When the minimum balance is not maintained, the charges immediately revert to the normal Pay as you use fees. The following table illustrates the extent of the impact on costs when the minimum balances are not kept. The effect of forgone interest on the minimum balance is factored into the cost of those instances where balances are maintained. Costs of the FNB Fee Saver accounts when minimum balances are kept and not kept R R R R Smart Balance kept R33,37 R34,42 R36,52 R37,57 Cheque Balance not kept R94,40 R116,45 R176,65 R203,70 Gold Cheque Balance kept R33,37 R34,42 R36,52 R37,57 Balance not kept R99,40 R121,45 R181,65 R208,70 Platinum Cheque Balance kept R33,37 R34,42 R36,52 R37,57 Balance not kept R107,40 R129,45 R189,65 R216,70 It is clear that the Fee Saver accounts are only suitable for persons who know that they will be able to keep the minimum balance at all times. Should the balance drop below R9 000 for just one day, the costs can rise sharply. It does not mean that the Fee Saver accounts are inferior products, but merely that they are only suitable for certain clients. 67

68 The accounts that would generally be more popular are the Unlimited accounts. No minimum balance needs to be maintained in the case of these accounts. A fixed monthly fee is payable and thereafter almost all the transactions most clients regularly do are free of charge. These accounts are similar to Absa s Value Bundles discussed before. The cost of FNB s Unlimited accounts have only risen marginally from 2011 to 2012 and like in 2011, these accounts are still a good choice for people who want to have peace of mind that their bank charges will not deviate too much from the monthly fees of R79, R97 and R120 for the Smart Cheque, Gold Cheque and Platinum Cheque accounts on the Unlimited option. There is, however, now stronger competition than before from Absa in the form of the latter s Value Bundles, as well as from Standard Bank with its revised Fixed Fee accounts. The one catch to be found in FNB s Unlimited accounts in 2010 and 2011 still remains, namely the high cost of withdrawals at ATMs of other banks. This cost has however decreased significantly in Where one withdrawal at another bank s ATM (with the exception of the first withdrawal in a 12 month cycle) incurred a fee of R32 on Unlimited accounts in 2011, the fee is now the same as that which applies to FNB s other accounts, namely R6,50 plus R6 per R500 or part thereof, with a maximum fee of R24. FNB offers numerous additional perks on most of its accounts, which will vary in utility and value from client to client. For example, the bank offers internet data included in many of its accounts. It also offers various discounts on cell phone airtime bought via the bank s electronic channels. The ebucks rewards programme will also have strong appeal for many clients. Prospective FNB clients should investigate these additional perks and should establish how much value these would really offer them Standard Bank During 2012 Standard Bank made big adjustments to its accounts and bank charges. Many types of accounts were done away with and a few new ones were created or the names of existing accounts were changed. The account which Standard Bank started to promote strongly in 2012 is the Elite Fixed Fee account, also called the Elite Plus account. This account has a fixed monthly fee of R99 after which almost all regular transactions are free. The Elite Fixed Fee account is, however, not really a new account. It is largely the same as the Classic Cheque Fixed Fee account of In 2011 and in 2010 the Classic Cheque Fixed Fee account was mostly Standard Bank s cheapest account. The one significant improvement associated with the name change, is that whereas the former Classic Cheque 68

69 account only offered 30 free transactions, the Elite Fixed Fee account offers an unlimited number of free transactions. To qualify for the Elite accounts a client needs to have a gross income of R8 000 per month (or R5 000 if the client holds a three year tertiary qualification). The Elite accounts also offer discount if an account holder s spouse also opens such an account. 22 Standard Bank s Pay as you transact option is still available. The fees on this option have been lowered significantly compared to those of 2011, the decrease being around 22% to 38%, depending on the user profile. However, for most clients the Fixed Fee option will still be better. Standard Bank s Elite account is also available on a Refund option. A rebate, the amount of which varies, is paid on bank charges if certain minimum balances are maintained. This might be a suitable option for certain account holders but for the majority of clients the Fixed Fee option will offer the best balance. Although the Elite Fixed Fee account is an option which can definitely be considered, it is in most instances not Standard Bank s cheapest account this year. That honour befalls the new Achiever Electronic account. This account s monthly fee is R69, whereafter most of the regular transactions do not incur any additional fees. Like in previous years, Standard Bank is still being hamstrung by the fact that it charges excessively high fees when stop orders 23 are created or amended. Of all the banks included in the analysis Standard Bank and Capitec are indeed the only ones charging a fee for this service. Capitec s fee is R1,50, but Standard Bank s fee for this service is R16 on all accounts analysed in this report. The following table shows what the costs of Standard Bank s Elite Fixed Fee and Achiever Electronic accounts would have been had that charge been R0, and it indicates how these accounts would then compare with those of the other banks. 22 Standard Bank also offers Prestige accounts which are only available to persons with a gross income of R or more per month, or who have an honours degree. The fees on these accounts are higher than the fees on Elite accounts, but the structure of the fees remains the same. For example the monthly fee of the Prestige Fixed Fee account is R169, whereas the monthly fee of the Elite Fixed Fee account is R99. The main additional benefit of a Prestige account above an Elite account is the access to a Prestige Banker who can offer financial advice. 23 Stop orders are regular payments in terms of which an account holder has a specific amount transferred monthly and on a specific date to a beneficiary. It differs from a debit order where the instruction to debit the account does not come from the account holder, but from the beneficiary and where the amount may also vary. 69

70 The table shows that when this extremely high stop order amendment fee is left out of the calculation the Standard Bank accounts in question actually compare well with their competition from the other banks. There is only a few rand s difference between the comparable accounts of Standard Bank, FNB and Absa, with Nedbank s charges being somewhat higher. Clients who never or hardly ever use stop orders could therefore indeed consider these Standard Bank accounts as an option, but it is important not to be caught off guard by these fees that Standard Bank charges on its accounts. Standard Bank s Elite Fixed Fee and Achiever Electronic accounts compared to competitors, with the R16 fee for creating or amending stop orders omitted Basic transaction profile R7 500 R R R SB Achiever Electronic R77,70 R78,55 R76,75 R77,60 SB Elite Fixed Fee R100,70 R101,55 R103,25 R104,10 Absa Silver Value Bundle R80,50 R81,25 R82,75 R83,50 Absa Gold Value Bundle R110,50 R111,25 R112,75 R113,50 FNB Smart Cheque Unlimited R81,10 R82,15 R84,25 R85,30 FNB Gold Unlimited R99,10 R100,15 R102,25 R103,30 Nedbank Savvy Electronic R99,70 R100,40 R98,15 R98,85 Nedbank Everyday Current R125,70 R126,40 R124,15 R124,85 Capitec Global One (no interest) R28,60 R40,00 R63,40 R72,00 A significant improvement at Standard Bank is that the bank s SMS notifications regarding account activity are now entirely free of charge. In 2010 and 2011 only 12 SMSes per month were free of charge for anything more than 12 SMSes the client had to subscribe to MyUpdates Maxi service at R17 per month. This has changed in 2012 so that from the outset an unlimited number of SMS notifications are free of charge, not only Nedbank At Nedbank, the Savvy Electronic Account is the cheapest current account the bank offers for all 12 profiles. This account has a fixed monthly fee of R79 per month (it was R75 in 2011 and R69 in 2010), in exchange for which an unlimited number of the most common transactions, such as card purchases, debit orders and internet payments are free. Otherwise, not many other aspects of Nedbank s current accounts are pertinent to this report, except for the fact that certain people may also find the bank s Everyday Current account attractive as this account s fees can come down by R30 per month if the client links 70

71 his or her Nedbank mortgage bond and credit card debit orders to the Everyday Current account. In 2010 and 2011 Nedbank s charges were in the main only marginally higher than FNB s and significantly lower than Absa s and Standard Bank s. In 2012 Absa s and Standard Bank s charges have come down significantly, and FNB s and Capitec s charges have in most instances shown a slight decrease. The charges on Nedbank s current accounts have, however, increased by approximately 4,7% completely out of step with the general trend. This causes Nedbank to emerge as the most expensive of the five banks compared in this year s report Conclusion on current accounts It is noticeable how the bank charges have decrease on almost all current accounts in This is a reversal of previous years where costs decreased on only a few accounts, and where the costs on most accounts showed marked increases. This year, only Nedbank disappointed with cost increases of approximately 4,2% to 5,6% on all current accounts and on all of the user profiles. Nedbank s accounts are still, in general, not much more expensive than those of its competitors, but the fact that Nedbank increased fees while its competitors lowered theirs, creates the impression that the bank is not in touch with the latest trends in South African transactional banking. In particular, Absa and Standard Bank must both be congratulated on their successful efforts to make the bank charges on their accounts more competitive. Absa s new Value Bundles and Standard Bank s Elite Fixed Fee and Achiever Electronic accounts can now compete with FNB s Unlimited accounts. Whereas in 2010 and 2011 there was only really a choice between Capitec and FNB as far as cheapest account was concerned, there is now good reason to also consider Absa and Standard Bank. It would appear as though a new informal standard is developing in respect of the costs of the bundle option type of current account, where the monthly cost stabilises at around R100 at most of the banks. Hopefully this informal standard will in the years to come tend to decrease rather than increase slowly but surely. Another point regarding the package or bundle options, which has been made in 2010 and 2011 but which is still valid, is that these options are cheap merely because most of the Pay as you use accounts are so expensive. 71

72 The high dishonour fees charged when debit orders do not go through because of insufficient funds is still a characteristic of current accounts. This aspect of South African banking will remain controversial, because there seems to be no good reason why these dishonour fees should be that high, or, for that matter, why they are being charged at all. That being said, it would seem as though some efforts are now being made to warn clients when their balances drop dangerously low in order to avoid such penalties more easily. Like in 2010 and 2011, it also emerges from the comparisons that the cheapest current account option is often the same for all the different expenditure profiles. The account options marketed to higher income clients are often, as far as bank charges are concerned, not the lowest even for people with a relatively high income. It therefore makes sense for people of all income groups to check carefully whether their accounts or options are really offering the best value for money. It could well be that when the account was opened the bank s consultant recommended a specific account merely on the grounds of income level, while that account is actually merely more expensive without offering any tangible advantages above those accounts generally marketed to people with a lower income. 72

73 5. Comparison of new low cost accounts Since Capitec started to gain a significant market share with its simple, low cost Global One account, the Big Four banks have all created new, low cost accounts to compete at this level. Absa offers the Transact account, previously informally known as the 1234 account. FNB offers the EasyPlan or Easy account. Standard Bank has the AccessAccount and Nedbank the Ke Yona account. None of these accounts were included in the 2010 and 2011 Banking Charges Reports, even though some of them already existed at the time. The accounts were not included because they were subject to various special requirements (some of which still apply) which made direct comparison with other accounts difficult. However, some of the banks were unhappy that these accounts were completely omitted from the analysis and felt that these accounts should also be included in the report. They are therefore now being included for the first time, but in a separate section because it still is not really possible to compare these accounts with regular accounts directly. Given that the complete or partial purpose of these accounts is to compete with Capitec, the Capitec Global One account is also included in this section. 5.1 Absa Transact Absa s Transact account is advertised as being a basic transactional account that gives you all the everyday banking convenience you need. However, this convenience does not include internet banking services as such services are not available to Transact account holders. Cell phone and telephone banking are available, though. Holders of this account are prohibited from holding any other transactional accounts with Absa. Cash withdrawals and debit card purchases are limited to R2 000 each per day. These measures serve to hamstring the account and reduce its usefulness. However, people who do not have internet access in any case will obviously not be affected by the lack of internet banking services on this account. The marketing material also claims that the account incurs no monthly service fee, but in the fine print at the bottom of the page it is stated that a R25 service fee is levied should credits on the account be less than R2 000 during the month in question. If such a fee is unexpectedly levied it could be a shock to people with a low income, the very people the 73

74 account is being aimed at, and it is unfortunate that this important detail is hidden in the fine print. One positive aspect about the Transact account is that no dishonour fee is levied if a debit order does not succeed. This is the only account in the entire analysis with this feature. 5.2 FNB Easy Account FNB s EasyPlan account or Easy Account is the account which is most clearly aimed at competing directly with Capitec. Many of the fees are just a few cents lower than Capitec s fees for the same type of transaction. For example, the fee for a cash withdrawal at a till point is R0,90 on the Easy account, whereas Capitec s fee is R1,00. The fee for a debit order on the Easy account is R2,95, where Capitec s fee is R3,00. FNB s EasyPlan account or Easy Account is marketed with the phrase: With FNB EasyPlan, there are no hidden costs. The Easy account brochure includes a table presenting a user profile which compares the account with various other accounts offered by Banks A to D. These banks are not identified but are presented under the familiar colours of the other members of the Big Four, while Capitec is presented by its blue and red corporate colours. The user profile which is used in the brochure comprises stop orders, debit orders, bank statements obtained inside a branch, money transfers to other accounts held by same account holder, debit card purchases, cash withdrawals at a till point, cash deposits at a branch, withdrawals at an ATM, withdrawals at another bank s ATM and the monthly account fee. The monthly banking costs of FNB s Easy account are the cheapest on this user profile, at R24,78, with Capitec in second place at R33,17 a difference of R8,39. However, there is actually a hidden cost to the Easy account which is not included in this table. It can be found on another page in the brochure the R8,50 monthly fee for internet services, cell phone services and SMS notifications. These services are offered without any additional charges by the other banks, except in the case of Nedbank s Ke Yona account where SMS notifications incur a monthly fee of R2, and Capitec and Absa, who levy fees of R0,40 and R0,50 per SMS respectively. 74

75 When this R8,50 monthly fee on the FNB Easy account is also included and the cost of SMS notifications is added to Capitec s cost, then the difference between the average monthly costs of the two accounts changes to only R4,95. This user profile of FNB also does not make provision for the fact that the Capitec account holder with a balance of only R1 215 will earn R4,95 interest per month. This interest would cancel out the difference in costs. Another hidden cost associated with the Easy account which is only found in the fine print is that when certain transactions, such as a cash deposit, are done at a normal FNB branch instead of at an EasyPlan branch, a higher fee is charged. The cash deposit fee at an EasyPlan branch is R3,25, but if it is done at a normal FNB branch, then 1,35% of the value of the amount is levied as a fee, with a minimum fee of R20. The Easy account s Savings Pocket offers 1,5% interest on balances of R1 to R3 500, 2% interest on balances of R3 500 to R7 000, 4,5% interest on balances of R7 000 to R and only 1% interest on balances of R and more. It only applies if the money is transferred to the Savings Pocket. In contrast, Capitec offers 5% interest on any balance lower than R and 4,25% interest on any balance higher than R The above does not mean that the Easy account is a bad or expensive account, but merely that it does include a few hidden costs and has some limitations which should be noted by prospective clients. 5.3 Standard Bank AccessAccount During the course of 2012 Standard Bank consolidated its various pre-existing cheap accounts into the AccessAccount. Some of the older accounts still exist, but are available to existing account holders only and are not offered to new clients anymore. The AccessAccount can only be opened at Standard Bank s Loan Centres and at the bank s Mobile Sales Agents not at normal Standard Bank branches. The AccessAccount is available in two different variations, the normal Pay as you transact option and a Plan option where a monthly fee of R30 is paid in exchange for three cash withdrawals, one cash deposit, one electronic transaction, one debit order and four debit card purchases. When the Pay as you transact fees for this combination of transactions are added together, it gives a total of exactly R30. 75

76 The Plan option is, therefore, close to pointless. There is almost no reason to choose it because the same transactions on the Pay as you transact option would cost exactly the same. The only additional difference, according to the information on Standard Bank s website, is that the Plan option offers unlimited debit card transactions at AccessPoints, which might be of use to some clients. Nonetheless, the Plan option seems to be more like a cynical marketing exercise by which clients are confused into believing that the account s fee will always only be R30 per month. However, if the client performs more transactions than the combination of included transactions, his banking costs will rise. If a client does not use all the transactions included, Standard Bank also makes more money than what would have been the case had the client chosen the Pay as you transact option. Given that the Plan option is therefore actually redundant, it has not been included in the analyses in the next section. Save for a handful of exceptions the AccessAccount s fees are the highest of all the fees analysed in this section of the report. 5.4 Nedbank Ke Yona The Nedbank Ke Yona account is advertised on Nedbank s website with the phrase: The product also offers best value for money and the most competitive pricing structure. This statement must be subjected to scrutiny. Firstly, like Absa s Transact account, the Ke Yona account does not offer any internet banking services. This immediately lowers the account s value for money although it could be argued that a large segment of this account s target market would in any event not use the internet regularly. It is, however, still somewhat insulting to the target market to handicap the account in this way. Secondly, the motivation for Nedbank s statement that the Ke Yona account has the most competitive pricing structure is not clear. Hopefully they do not mean that the account s price structure competes well with the cheap accounts of Nedbank s competitors. Except for a handful of exceptions the fees of the Ke Yona account are, after Standard Bank s AccessAccount, the highest of all the cheap accounts, as can be seen in the comparison below. 76

77 The Ke Yona account does include a funeral policy of R2 000, which competing accounts do not offer without levying an additional fee. The Ke Yona account s dishonour fees of R10 for unsuccessful debit orders are also limited to four per month. 5.5 Comparison of the low cost accounts on the R7 500 and R profiles The costs of the abovementioned accounts, as well as that of the Capitec s account, were calculated on the R7 500 and R user profiles 24 and are indicated in the following table. These two profiles include 12 and 17 transactions per month respectively. The higher user profiles are not included because these accounts (except the Capitec account) are specifically aimed at people with a low income and who do a small number of transactions per month. Absa s Transact account and Nedbank s Ke Yona account do not offer internet banking services. Fees for cell phone banking were therefore used for these two accounts instead of the fees for internet banking services for the relevant transactions. Capitec s costs are indicated in two ways without any interest as well as with the amount of interest that will accrue on a balance of R2 000, which is R8,15 per month. Standard Bank s AccessAccount is also indicated in two ways. The alternative way deals with the scenario where the R16 fee incurred by an amended stop order is omitted. 24 See sections 4.1 and 4.2 in the report for an exposition of the user profiles in question. 77

78 Capitec s Global One account is narrowly beaten by FNB s Easy account, except on the R7 500 user profile where a withdrawal at another bank s ATM is added. The differences amount to only a few cents, though. Both Capitec and FNB are beaten by Absa s Transact account 25 on the basic R7 500 user profile. If the minimal amount of R8,15 interest that is earned on a R2 000 balance at Capitec is included, Capitec is the cheapest of the low cost accounts throughout the comparison. Standard Bank s AccessAccount is the most expensive throughout, even when the R16 fee for an amended stop order is not included. Here, Standard Bank s is mainly disadvantaged by its fees for using a debit card and the fees for debit and stop orders which are higher than the other banks fees for the same transactions. The choice is therefore really just between Capitec s Global One account and FNB s Easy account. Due to the fact that FNB s Easy account does not offer interest on normal balances and the interest rates for balances in the Savings Pocket do not compete with those that Capitec offers, Capitec will probably still be the cheapest option for most low income clients. 25 Keep in mind that the Transact account does not offer internet banking services and that no interest is paid on positive balances and that an additional R25 monthly fee is levied if the credits to the account do not exceed R2 000 in a given month. 78