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By Hilton Tarrant

Moneyweb: Columnist

This is how no-frills bank accounts compare

Is an entry-level account for everyone?

There is a long-running argument that many customers would save a ton of money (easily thousands of rands a year) by using basic, no-frills banking. Indeed, Capitec’s steady climb into the middle- and upper-income markets is evidence-enough that the demand is there.

It has effectively created the market for a single, simple, cost-effective bank account. The other banks have, over time, rushed to emulate this model (after the failed Mzansi account “experiment”) and consumers now have similar-looking accounts to choose between at all five major retail banks. On a headline basis, in other words, the monthly fee, these accounts all look alike – they’re priced around the R5 per month mark. But, the comparison below shows just how different they are when you drill into the pricing of specific transactions.

Depending on your usage habits, you may very well end up spending close to (or more than!) R100 a month on bank charges on an entry-level account. Remember, that for the four full-service banks (i.e. excluding Capitec), these accounts are priced to target a particular segment while preventing (or limiting) cannibalisation of its existing base (on “gold” level accounts, for example). The banks will argue that these accounts are “designed” to “suit” a particular low-volume user.

This is logical and should not be unexpected. If a bank can get you to pay R100 a month (or R200) instead of R50 (or R100) for a current account, then it will try to do so. Capitec, of course, has no such segmented (or legacy) base to defend which is why its pursued the “one account” strategy from the start which is why its pursued the “one account” strategy from the start.

Absa FNB Nedbank Standard Bank Capitec
Transact Easy Account Pay-As-You-Use Access Account Global One
Monthly fee R4.95 R4.95 R5* R4.99 R5.25
Minimum balance R50 R20 R25
Cash withdrawal (Own ATM) R5 R1.85/R100 R6.50 R1.60/R100 R5.50
Cash withdrawal (Other ATM) R8.50 R7 + R1.85/R100 R8 + 70c/R100 R6.70 + R1.60/R100 R8.50
Cash withdrawal (Point of Sale) R1.15 Free R2 Free R1.30
Cash deposit (Auomated deposit own ATM) R3.95 + R1.35/R100 80c/R100 R2 +70c/R100 R1.60/R100 80c/R100
Purchase/Swipe (Point of Sale) Free Free Free Free Free
Account payment (Own ATM) R3.50 R3.50 R3 R1.50 R4 (branch)
Account payment (online/mobile) R2.00 R3.50 R3 R1.50 R1.50
Inter-account transfer (electronic) Free Free Free Free Free
Internal debit order Free Free Free Free Free
External debit order R3.50 R3.50 R5 R9.50 R3.40
Cash send (ATM/online/mobile) R8.50 R9.95 R6 (up to R1000) R9.95 N/A
Balance enquiry (Own ATM) Free Free Free Free (R1.50 printed) Free
Prepaid airtime top-up (electronic channels) R1.15 50c per R5 (max R1.50) Free R1.10 Free
Declined transaction (insufficient funds) Free R8.50 R3.50 at ATM, R7.50 at POS R2.60 at ATM, R7.90 at POS Free (R4.75 other ATM)
Dishonoured/returned payment Free R8.50 R10 (capped at 4/month) R25 R4.75
Debit card replacement R120 R85 R100 R130 R53

But, until you’ve got the 2.4 children, two cars, white-picket fence house sorted, you’ll likely do just fine with an entry-level account. This is highly dependent on your life stage and lifestyle (sure, there are some among us who wouldn’t be caught dead without their platinum or private banking cards, even though they are nowhere near qualifying for them, strictly speaking). For students, graduates, blue-collar workers, service workers, freelancers and retirees, these kind of accounts will always almost be the most cost effective for day-to-day transactions.

On relatively heavy usage (30 transactions a month, of which nearly half are POS purchases), you can see that – very quickly – some of these accounts start becoming pricey. But, they’re still cheaper than the R100-a-month entry-level, gold-type bundles peddled by the banks.

Absa FNB Nedbank Standard Bank Capitec
Transact Easy Account Pay-As-You-Use Access Account Global One
Monthly fee R4.95 R4.95 R5 R4.99 R5.25
Inter-account transfers 2 R0 R0 R0 R0 R0
Electronic payments (online/mobile) 6 R12 R21 R18 R9 R9
Debit orders (internal) 1 R0 R0 R0 R0 R0
Debit orders (external) 4 R14 R14 R20 R38 R13.60
Cash withdrawls (R1000, own ATM) 2 R10 R37 R13 R32 R11
POS purchases 12 R0 R0 R0 R0 R0
Airtime recharge 4 R4.60 R6* R0 R4.40 R0
Total per month R45.55 R82.95 R56 R88.39 R38.85
‘Bundled’ pricing R55 R49 R50 N/A N/A

Here, Capitec shines because its pricing for transactions like debit orders, cash withdrawals, and electronic payments is the least punitive of all five banks. It is important to note that with the Global One account, you also earn interest on positive balances (currently at 5.35% per annum). With a R2 000 balance in the account, you’ll earn about R9 back in interest per month. Even on heavy usage – not typical for the broader entry-level segment – bank charges will be around R30. The bank has publicly stated that “by far the majority – more than 5.5 million – of Capitec clients pay less than R50 per month in bank costs”.

In FNB’s case, pricing seems to be designed to push customers who don’t only use a very base level of services per month to the Easy Account Bundle (at R49 per month). Basically, if an Easy Account customer makes electronic payments, has debit orders and draws cash from FNB ATMs (versus Cash@Till which is free), chances are the bundle will be more cost-effective. It offers, monthly, four free cash withdrawals at FNB ATMs, R4 000 worth of cash deposits at FNB ATMs and a combination of ten free of the following transactions: electronic payments, external debit orders and prepaid airtime purchases.

Nedbank offers something similar – the Ke Yona Bundle – at R49 per month. This zero-rates the first eight transactions per month that typically attract high charges (i.e. debit orders, ATM/POS withdrawals, cash deposits). Thereafter, the out-of-bundle (Pay-As-You-Use) pricing applies. Strangely, on the Ke Yona Bundle, Nedbank charges R4 for every point-of-sale purchase/till swipe!

Absa suggests the Flex Account as the next step up, but this is more expensive than the Transact Account on practically every type of transaction! The Flexi Bundle makes a little more sense if you’re a high volume user but still want an entry-level type account, but this is priced at R55 per month. Included are three (Absa) ATM cash withdrawals and 11 external debit orders or account payments per month.

Standard Bank, amazingly, has a large gap in segmentation with nothing between its R4.99 a month (Access) account and R100 a month Elite Banking (“gold”) account.

Bottom line: You’ll be hard-pressed to find better value in the no-frills banking space than Capitec, even if you typically are a “heavy” user. And, right now, its only “limitations” are the size of its ATM footprint (withdrawals from other ATMs are only R3 more) and the absence of a “money transfer” service to any person (i.e. outside of Capitec clients).

  •  Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.
  • He owns shares in FirstRand, first purchased in July 2011.
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