A simple calculation to do

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

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

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

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

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

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

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

For the purposes of this exercise, FNB pricing will be used (as its most relevant to me). But, the overall price structures (bundled vs unbundled) are roughly the same for the four full-service banks, and links to the most recent pricing for the various banks are available here:

  • FNB (July 2016 to June 2017)… Moneyweb analysis here
  • Absa (from January 2017)… Moneyweb analysis here
  • Nedbank (from January 2017)… Moneyweb analysis here
  • Standard Bank (from January 2017)… Moneyweb analysis here

Now, figure out what an average month of transactions on your cheque account looks like. For most, this won’t change meaningfully month-to-month. There’ll be some debit orders (internal and external), electronic account payments, inter-account transfers (e.g. settling your credit card or moving money to a savings account), and perhaps some withdrawals from an ATM. It isn’t too useful to look at one month in isolation as there may be atypical transactions that distort the picture.

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