Smart Banking in South Africa

Many people are scared or simply too lazy to change their bank; I do not fall into either of these categories. As with my history of buying cars, I have much the same attitude towards banking – if I haven’t truely researched my options; how am I supposed to make an educated decision?

Here in South Africa we are “monopolised” (exaggeration, of course) by our big 4 (ABSA, FNB, NedBank and Standard Bank), our parents and grandparents have been using them for years and therefore we simply follow blindly. The big 4 are all as bad as each other, some (FNB) more innovative than others – but at the end of the day you are usually paying far too much for what you get.

I’m not going to delve into the big 4, as most of us are quite aware of at least one of the big 4 and the rest are usually quite similar.

Two fairly new-comers to the South African banking industry are:

  1. Virgin Money
  2. Capitec Bank

For this post, I’m going to propose how using the above 2 banks you can bank efficiently and benefit both yourself and your credit record while doing so.

 

Let’s start with Capitec Bank

Capitec Bank’s “Global One” account provides consumers with a debit card linked to a savings account. The fees (currently) per month are R4.50 for the account and includes Internet Banking at no charge.  The interest rate is, as with all other banks, linked to the prime lending rate, but is significantly higher than just about any other daily banking account – especially considering its only R4.50 per month administration fee. Even if you earn a low salary you are more than likely going to make that R4.50 back in interest due to the rates that Capitec provides (a higher rate for amounts under R10 000 – favouring the less fortunate for a change).

Capitec also provides SMS alerts for all transactions, charged at 40c per SMS, which can be disabled if you don’t wish to have it. The major savings come in to play when it comes EFT’s and debit orders. An EFT payment into your bank account is free, a debit order is R2.75, a manual EFT payment is R2.50 and Debit Card swipes are free as well. When it comes to cash withdrawals, Capitec have gone the route of a number of other financial providers and allowed for cash withdrawals from shop tellers; if you draw from Pick n Pay, Shoprite, Boxer, Checkers or PEP its a R1 fixed fee – if you draw from a Capitec ATM its R3.50 fixed fee and if you draw from any other ATM its R7.00 – so basically if you draw over a certain amount from one of the big 4 banks, you’re probably being charged less than one of their own customers!

Another great thing about Capitec is that payments from other banks usually land up in your Capitec account the same day or next day depending on what time the payment was made.

 

Next, let’s take a look at Virgin Money

Virgin Money’s Credit Card provides one of the lowest debit interest rates (currently 14%) and a better-than-average credit interest rate of 3% currently. This card also provides free swipes on petrol transactions – and of course, as with any credit card – there is no transaction fees for credit swipes. To quote their website you have “up to 25 days to settle your amount owing at the end of each month” – so, no interest charged until you’ve surpassed that 25 day time period.

 

There’s nothing more I feel is worth mentioning on the two as what I’ve outlined should theoretically be all you use your card for. Remember, keep away from purchasing on budget!

So what are the rules you should be sticking to to get the best out of your banking situation?

  1. Store all your cash in your Capitec Bank account.
  2. If you need cash, withdraw from Capitec at one of the shopping centre tills.
  3. If you’re shopping, use your Virgin Money credit card. Why? Because you don’t pay interest until 25 days after the end of the month; leave your cash in Capitec where it can take advantage of that sweet interest rate!
  4. ALWAYS be aware of how much you can afford to spend, don’t spend more than you have and try not to buy things that rely on the fact that you’re going to get your salary soon.
  5. Settle your full credit card debt before the interest kicks in (to be safe, I wouldnt settle it less than 5 days before the interest kicks in, just in case).

By following these rules and using the above banks you can save yourself a significant amount of money, not to mention earn some interest!

PS: By using your credit card for payments you are helping your credit record (having no credit doesn’t improve your credit record – you’d like to buy a house one day, wouldn’t you?)

Any better tips welcome, just leave a comment :-)

10 thoughts on “Smart Banking in South Africa

  1. Dear Sir

    I’m responsible for fees and pricing at FNB, and would suggest that you to follow your own advice and truly research all the options before making a decision and especially before publishing an article about it :-)

    Capitec is no longer the cheapest bank in South Africa: “FNB Easyplan” – FNB’s low cost banking division – now has 96 branches (and counting) and is our response to Capitec’s stripped down banking offering – and is cheaper still than Capitec. FNB Easyplan is now almost 2 years old – and offers simple banking at the lowest prices in South Africa.

    I’d like to send you some information by email – please would you email me your details on email removed so that I can respond with a detailed comparison of Price (between FNB Easyplan and Capitec) and give you some more info on FNB Easyplan. I’d be happy to meet with you and answer any other questions on FNB’s bank fees and pricing that you may have.

    Yours sincerely

    James Fowle
    Pricing Executive
    FNB Core Banking Solutions
    email removed

    • Hello and welcome Mr Fowle, thank you for your comment! Before I start, let me just inform you that I was in fact at the opening day of one of your new Easy Plan branches, conveniently located next to the Capitec Branch I opened my Capitec Account at. I am also a current FNB Platinum account holder and I have a Discovery Credit Card which, as you know, is FNB based. I also had my business bank and credit card accounts with FNB for 2.5 years – so I’m certainly not unfamiliar with FNB.

      First I’m going to stick to the topic here, and with all fairness I will outline for the readers the differences in prices that make FNB Easy Plan the cheapest in SA.
      Easy Plan – R3.95/month
      Capitec – R4.50/month
      So we have a 55c lead on the monthly fees.
      Easy Plan – Cash withdrawls from an FNB ATM – R2.95
      Capitec – Cash withdrawls from a Capitec ATM – R3.50
      Another 55c saving

      Strangely enough, I’ve searched as best I can but I cannot find the rest of the fee information for this Easy Plan on FNB.co.za nor can I find the interest rates for the FNB Easy Plan – as a matter of interest, why? I’ve also noted that you cannot apply for an Easy Plan via the website, yet you can for almost any other type of personal account – why is this?

      None the less, I’m going to take the side by side comparison on thinkmoney.co.za as my guide, seeing as though FNB Easy is not worthy of being mentioned on the website!

      But here’s the fine print that put me off sticking to FNB and going the “Easy Account” route.
      1) Internet banking is not included in this price – You need to pay an extra R8.50/month to have internet banking with your FNB Easy Plan, that brings our total up to R12.45 per month; and, as the title of my article states I’m talking about “Smart banking” here, there’s nothing smart about banking via ATM’s and Branches when you can do it via the Internet.
      2) Considering the wopping 55c you are going to be saving per month – what about the gained interest on your balance? Let the figures speak for themselves:
      FNB Easy
      R0-R3499 = 1.50%
      R3500-R7499 = 2.00%
      R7500-R9999 = 5.50%
      R10000 and up = 1.00%
      Capitec
      R0-R9999 = 6.00%
      R10000 and up = 4.75%

      I’m confident that I’ll make up the cents I’m losing out on with Capitecs interest rate.

      Now we can sit and say oh but you save 25c with Capitec doing this, and oh you save 25c with FNB Easy doing that, but, the point here is, Capitec is not hiding behind a few key charges that they knocked a few cents off the competitors to “slap them in the face” – this is how FNB is coming across.

      The biggest question of mine is; instead of wasting millions of rands on opening up separate FNB branches all over the country (where there already are plenty of FNB branches, most of them probably very close to the new “FNB Easy” branches), why don’t you take that money and spend it on optimising and lowering the fees for your faithful, existing customers?

    • @James: In my opinion, “FNB Easyplan” is purely a product created so that it can be pulled out and displayed when someone say’s FNB isn’t the cheapest. It’s barely advertised and never mentioned when opening an account.
      @Michael: Great advice and good working examples.

  2. Hi Izak,

    Thanks for your comment, an interesting article which seems to back up Matts claim to FNB Easy simply being a low blow against Capitec. I see you are also an employee of FNB (same IP address as James).

    I’d be very interested to see a response to my initial question of – why did FNB waste all that money on creating what is basically a new bank instead of revising it’s current pricing plans? Must existing FNB customers close their existing FNB accounts and move to an FNB Easy branch just to take advantage of the FNB Easy price structure? What about the poor interest rates in comparison to Capitec? Why is internet banking not included?

    Capitec would be seriously hurt if FNB equalled or surpassed them on the above mentioned things that make FNB Easy plan a big fail (in my opinion). Clearly FNB is not short on capital.

  3. Hi All, very educational comments, Thank you! Can anyone please tell me how much it would cost me to have someone EFT funds into my FNB Easy Account. Thanx guys! Bobby J.

  4. hi, great advice.. i wanted to find out how long does it take for money to reflect on nedbank from capitec. I transfered money this morning, i wanted to find out how long will it reflect in the nedbank account?

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