You will best be able to save money on your bank charges if you know what cheaper alternatives are available to you.
Personal Finance approached the big banks for some advice on how to save money on your monthly bank charges, which is taking an ever-increasing chunk of your hard-earned cash.
You should discuss your requirements with your bank and ask for the service fee options most suited to your transactions and needs.
Most of the banks offer a fixed monthly service fee which includes a limited number of transactions and special deals for seniors. You can also save on bank costs by keeping a minimum balance in your account.
Diane Warren, of Standard Bank, says by choosing the products and services channels best suited to your requirements, you only pay for the features actually used. You should also review your options from time to time.
Ann Bramhill, of First National Bank, says you should check one year's bank statements and see what your service fees cost you on average every month. Compare this with the other options and see which one best suits your spending pattern and would make a cost improvement.
She says the pay-as-you-use option - where you are charged for every transaction - is most suitable for those who manage their accounts very carefully. Pay-as-you-use is the standard option and is applied if you do not specifically ask for another option, she says.
Luigi Magnelli, general manager of marketing at Absa, says the bulk of the charges on a current account are normally transaction charges relating to the payment of individuals or firms by cheque and making cash withdrawals, and you should look at managing these carefully.
Banks commonly offer the following cheaper alternatives to the pay-as-you-use charging method:
Fixed monthly service fees
Absa, Standard and FNB offer fixed monthly service fee options. This is an alternative to the normal service fee. It is not available on all accounts, and must be negotiated with your branch.
The offer is based on a set fee on a sliding scale, depending on the number of transactions incurred during the month. The cost may vary depending on the cheque product you have and the number of transactions you do in a month. It does not cover all charges.
Standard Bank's Warren says whether or not you should choose this option would depend on how you use your account, and what your monthly bank fees would normally be.
At Standard Bank, for example, the number of cheques it covers is limited, and the fee per cheque thereafter is R5. So, if you write a large number of cheques, this may not be the appropriate option for you, even if you spend a lot of money on bank fees.
Nedcor does not offer the option of a fixed monthly rate.
Choosing the right account
Warren says you should not use your savings account as a transactions account.
"Savings accounts are there to build balances so that we can pay better rates. So, if you use the account for transaction purposes, the costs of managing the account and the reducing balances are passed on to you."
Craig Rankin, of Nedcor, says savings accounts in many cases restrict access to funds.
Absa's Magnelli says an alternative to a cheque account is the savings account, which generally offers a higher interest rates on account balances than cheque accounts. But this is really an option only if the use of cheques is limited or non-existent. For example, on an ActiveSave account, if a balance of R2 500 is maintained on a daily basis, you don't pay charges on some transactions.
Minimum balance option
By maintaining a minimum credit balance in your account on a daily basis - which is currently R3 000 at Absa, R5 000 at Standard and FNB - many of your transactions and your monthly service fees are waived. But remember that your balance may not drop below the required minimum at any time, or the standard fees will kick in.
But is it worth tying up a few thousand rand that could earn more in an investment account? This depends on other factors, the banks say.
Magnelli from Absa says that if you invest R3 000 and earn 10 percent in interest on these funds, your return on an annual basis would be R300 for the year or R25 per month. So, it follows that if your transactions cost more per month than R25 then the minimum balance option is worthwhile.
Whether or not you select the rebate option depends on the interest rate you would earn elsewhere, Warren says, but more importantly it depends on what you would normally pay in service fees. For example, on a 32-day notice account you would earn 7.25 percent a year. This equates to R30 a month for an amount of R5 000. Therefore, for the rebate option to be beneficial to you, you would need to pay more than R30 a month in service fees.
Bramhill of FNB says the fixed monthly fee is particularly suited to customers who maintain a fairly high balance in their account and possibly also need to minimise tax on interest earnings. Bear in mind that no interest is paid on your credit balances.
If you invested R5 000 in a fixed deposit for 12 months you would earn 9.5 percent interest. This means your fee saver account is costing you some R40 a month, but remember that you could pay tax on this interest as well, she says.
Senior packages
Special deals for seniors are available from most banks, but remember to ask for this.
At Absa you must be 55 years and over to qualify for rebates on service fees. The rebate you get depends on whether you can maintain a fixed or bonus deposit with a balance of R15 000 or put R20 000 in a money market fund with Absa. In both cases, your cheque account balance is allowed drop below the R3 000 level.
Absa's Magnelli says that these special deals should be negotiated, and the bank can request that you maintain a higher balance than R3 000, invest greater amounts than R15 000 or R20 000, or that you pay a higher management fee if you make a lot of transactions.
To qualify for a Consolidator account at Standard Bank you must be 60 years or older and have a minimum investment of R20 000 with the Standard Bank group. You can receive a rebate on your service fee, and you will also earn interest (unlike other non-Consolidator customers on the rebate option).
FNB's Seniors Award account is an option if you are over 55 and have R10 000 invested in any account with First National Bank. The Seniors Award offers a selection of banking services, many of them free: a personal cheque account on which no service fee is charged for normal payments and withdrawals; an additional 0.5 percent interest on published rates for fixed deposits 12 months and over; and other options on travel arrangements, estate planning and more. You will pay certain specified charges, including Saswitch fees, government duty and cash deposit fees. VAT is exclusive and is payable.
Nedbank clients over the age of 55 with R10 000 invested with the bank qualify for the Optimum account. No service fees are levied on this account and reduced ATM fees are charged. For example, you would not pay the R2.28 processing fee at the bank's own ATMs, only the cash withdrawal fee would apply.
Permanent Bank clients over the age of 55 with R20 000 invested with the bank qualify for a Prime Club cheque account. No service fees or ATM fees are levied on this type of account.
Other options
At FNB you can choose a tandem account. The spouse of the account holder holds an account entirely in his or her own name with all benefits and privacy, but could pay as little as 50 percent of the cheque fees charged on the primary account.
Also check with your bank about special deals for students or on youth accounts.
COST SAVING TIPS
* Pay your regular accounts via electronic media such as the telephone, internet or ATM using the account payment facility offered by banks. It costs you less than writing a cheque, especially for amounts between R300 and R500;
* Avoid doing your banking over the counter;
* Stick to your own bank's ATM network;
* Use stop orders for payments, or debit orders providing that these are signed with a reputable company;
* Negotiate cheque account charges with your branch. Your financial standing, the number of accounts you hold and your banking record may qualify you for a review of your fee structure;
* Try to limit your withdrawals to larger amounts less frequently. Cash withdrawal fees are charged on a sliding scale. You will pay a flat fee for the first R100 and a set fee for every R100 thereafter. The first fee is generally higher than the second, so it follows that by limiting the number of withdrawals you can save;
* Avoid penalty fees by managing your account responsibly. You are charged penalty fees and high interest for "bounced" cheques and debit orders if you do not have sufficient funds in your account; and
* Speak to your bank about an overdraft facility before you need it. Overdrawing without an arrangement will result in extra costs and embarrassment and it could affect your credit record.