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 :-)