The release of Solidarity’s annual Bank Charges Report usually generates a fair bit of interest, probably because consumers want to see whether Capitec will live up to its reputation as the country’s cheapest bank.
Although the report’s findings are often touted as showing which bank is “the cheapest”, its conclusions are based on specific criteria – in particular, the account chosen and the composition of the basket of transactions used to represent the banking needs of each income group.
The advent of online-only banks has further complicated the cost comparisons. This year’s report includes Bank Zero, Discovery Bank and TymeBank. According to report, because the services offered by these banks are limited, it would be unfair to compare them with the traditional banks.
Comparing a traditional bank, with its range of services and network of branches, and a purely digital bank is, in one sense, like comparing apples and oranges. On the other hand, it might not be from the consumer’s perspective. If you can get by with the services provided by an online bank, and those services cost less than at a traditional bank, is the cost comparison really unfair?
It shouldn’t come as a surprise that, according to this year’s report, the new online banks wiped the floor purely on a transaction costs comparison.
Twenty-five transactions that would cost between R99 and R143 at the traditional banks cost R21.50 at TymeBank or R25 at Bank Zero.
Theuns du Buisson, economic researcher at Solidarity, commented: “Even when compared to the cheapest accounts of the traditional banks, those with branches, the traditional banks are lagging far behind.”
As with last year’s report, the three user categories for comparing traditional bank accounts are:
- Accounted marketed to people with a low-income and fairly basic banking needs (12 and 17 transactions a month).
- Accounts marketed to people with a middle-class income and sophisticated banking needs (25 transactions a month).
- Accounts marketed to people with a higher middle-class income and sophisticated banking needs (30 transactions a month).
Competition between Absa and Capitec in low-income market
The findings in this category clearly illustrate how the transaction parameters influence the results. The Absa Transact account is the cheapest account (R37.10) when 12 transactions a month are conducted. But Capitec is cheaper when more transactions are added: a total fee of R41.90 for 17 transactions., whereas Absa Transact’s fees rise to R53.85.
Absa automatically upgrades your account to a Flexi account when regular income exceeds R5 000 a month. When this happens, costs almost double to R101.95.
Capitec is the only bank that offers interest on transaction accounts. For Capitec’s accounts, the report has calculated the monthly interest based on balances of R500, R2 000 and R5 000. If a balance of R5 000 is maintained, the monthly interest amounts to R10.41.
“This is significant as part of the cost profile, but this money could grow by much more than 2.5% in other products. However, for a transaction account this is not to be sneezed at,” the report says.
Although Nedbank has the highest fees for both transaction lists, the bank charges no monthly fees. FNB also has such an account, the FNB Easy Zero account, but as with Nedbank’s PAYU account, individual transaction costs are high, so the report used the more competitive FNB Easy PAYU account.
FNB Aspire cheapest for middle-income consumers
FNB’s Aspire Current account is the cheapest account in this category. The account costs R99 a month – this fee covers all the transactions on the report’s list.
Purely on costs, Capitec is the second cheapest at R102.60. However, if added value such as reward programmes is viewed as a requirement in this category, second place is taken by Standard Bank with R129.40.
Fixed monthly fees for all the banks are more or less the same, with a difference of R16 between the lowest (FNB) and the highest, Nedbank’s Savvy Plus Account, at R143. FNB also offers best value for money by offering more free transactions than any other account.
Absa’s Gold Bundle account costs R138.25 a month.
With the exclusion of Capitec, the accounts in this category all qualify for the banks’ respective loyalty programmes. Capitec does not offer an extensive loyalty programme, but this bank has been included because it has a considerable number of clients in this consumer group.
Apart from bank charges, there are many benefits to be considered by consumers, such as linked credit cards, discount for spouses and access to airport lounges.
FNB Fusion Premier is cheapest for upper-income consumers
If the accounts are judged purely on the grounds of costs, FNB’s Fusion Premier account is the cheapest, closely followed by Absa Premier Banking, with total costs of R236 and R243.50, respectively.
The Nedbank Savvy Bundle and the Standard Bank Professional accounts are slightly more expensive, with total costs of R267 and R265.60, respectively.
Competition in this category has also increased, with the difference between the costliest and the cheapest package amounting to a difference of less than 10% of total costs.
“Accounts in this category are more focused on added value and reward programmes than purely on costs. The aim of our report, however, is to compare costs, and consumers are encouraged to make sure the added value justifies the extra costs,” the report says.
Online-only banks
For these banks, Solidarity used the 25-transaction profile, except that ATM withdrawals replaced transactions at the counters of participating retailers.
The cheapest bank is TymeBank at R21.50 a month, followed by Bank Zero at R25 and Discovery Gold Suite at R90.
The report excluded Spot Money, because it has strict transaction limits – for example, 50 transactions or transactions to the value of R3 000 a day – “after which significant charges are levied on these otherwise cheap accounts”.
The monthly fee on Discovery Bank’s Gold Suite account rises to R125 if Vitality Money is included.
“The main benefits accompanying Discovery’s general Vitality programme therefore are not free, and consumers have to decide whether it is worth their while,” the report says.
What is free are discounts at outlets such as Shell, BP, several airlines, Virgin Active, Planet Fitness, Woolworths, Pick n Pay, Clicks and Dis-Chem.
“The R90, as against the other online banks’ low comparative costs of R21.50 and R25 for our list of transactions, therefore, should not simply at first glance be viewed as exorbitant. It still is lower than at any of the traditional banks, especially seeing that all the transactions on our list are included in the monthly fee of R90,” Solidarity says.
Neither TymeBank nor Bank Zero charge monthly fees, and all transactions that would be charged at traditional banks, such as an email message as proof of payment to the beneficiary, are free of charge at these banks.
Other services, such as purchasing airtime, are also free at these banks. For free withdrawals at TymeBank, one must first get a code on the app, otherwise the fee is R3 regardless of the amount.
Methodology
Du Buisson says the methodology for this year’s report was adjusted to keep pace with changes in consumer behaviour.
The profiles contain fewer cash transactions and more debit orders than in the past, and transactions that have been replaced completely by banks’ online services, such as balance enquiries, have been removed. To reflect the cheapest possible transaction options, messages to beneficiaries have been adapted to reflect email notifications instead of SMSs, because the former usually are free of charge.
Here is the basket of transactions that was used for this year’s report:
The report analyses accounts that are available to any member of the public. This means that private bank accounts and accounts for the youth, students, the aged and specific faith groups are excluded.
The report does not include accounts specifying minimum or maximum monthly income, unless it is the only one in the category offered by a specific bank.
Some accounts that do not cover full banking services – for example, not allowing debit orders – have been excluded.
The report excludes the cost of credit facilities.
In the case of some of the bundled accounts aimed at the higher-income groups, such services or the discount on them, have been included in the package.
The transaction accounts were compiled based on guidelines that correspond with the advice provided by the banks for saving on costs.
