Do you know that if fraudsters access your online banking profile, not only can they steal your cash – including any surplus funds you’ve paid into your home loan – they can also access any credit extended to you by the bank – in other words, they can max out your overdraft and credit card?
One way to limit your losses is to reduce the limits on your accounts.
Some limits are determined by you, while others are determined by your bank. For example, you decide on your daily cash withdrawal limit, but the bank decides on your overdraft and credit card limit.
Although the bank grants credit at its discretion, ultimately you decide how much credit you are willing to accept, according to your appetite for credit and risk.
Advocate Clive Pillay, the Ombudsman for Banking Services, says your ability to repay debt is more important than your appetite for credit or risk. His point is that you are ultimately responsible for your credit and you know how much credit you can afford.
Reducing your limits is generally easy. It can be more difficult to increase them, particularly when they relate to credit, because you should be subject to an affordability assessment in terms of the National Credit Act (see “What the NCA says about credit limits”, below).
Cash withdrawal limits
Most banks allow you to set your daily cash withdrawal limit. The maximum can be as high as R10 000, in the case of Standard Bank, for example.
If you don’t have reason to draw such large sums of money every day, it doesn’t make sense to have a high limit, and it exposes you to unnecessary risk. You can reduce (or increase) your daily cash withdrawal limit by making a phone call to your bank. Be sure to obtain a reference number.
Note that your daily cash withdrawal limit can apply to payments made via “cardless services” (Absa’s CashSend, First National Bank’s eWallet, Nedbank’s Send-iMali and Standard Bank’s Instant Money). Check with your bank.
These services enable you to send money to someone who does not have a bank account. The transaction is done on your online banking profile or via cellphone banking. The cash is sent via a voucher to the recipient’s cellphone number. With this payment mechanism, cash is obtained instantly, making it attractive to fraudsters.
Credit card limit
Two limits apply to your credit card. The actual limit – the amount of credit that the bank is willing to give you on your credit card – and the cash withdrawal limit, which is the amount of cash you can draw daily from your credit card, subject to a monthly maximum.
The cash withdrawal limit on your credit card is usually the same as the cash withdrawal limit that applies to your cheque account or transaction account.
A high daily cash withdrawal limit is dangerous, particularly when it’s the bank’s money, not yours, that you’re withdrawing.
If you never use your credit card to draw cash, you can instruct your bank to reduce the limit to zero.
Just because you qualify for a large credit facility doesn’t mean you should accept it. If you don’t need access to a large amount of credit, ask your bank to reduce the credit limit on your card. You can always apply for it to be increased at a later stage, if you need it.
A 70-year-old pensioner who is a customer of Standard Bank called Personal Finance this week to report how she fell for a phishing scam. She had only R600 in her transaction account, so the fraudsters raided her credit card up to the limit of R3 000 – an enormous loss for someone living on a limited fixed income.
You may qualify for a hefty overdraft – and consider it a nice-to-have – but if you don’t need it, reduce it to the bare minimum. Besides, an overdraft can be a debt trap for the ill-disciplined.
You may be able to apply online for an increase in your overdraft facility, but you can’t increase it; an increase would be subject to an affordability assessment.
The electronic account limit applies to the payment of beneficiaries and once-off payments (done on your internet banking profile) in any month. It does not apply to transfers between accounts or to debit orders on your account. It applies only to payments made by you in a month.
You can set this limit, but a very high limit exposes you to the risk of losing a large amount of money if a fraudster gains access to your internet banking profile.
Using your most recent three bank statements, work out how much money you typically spend in payments each month and set the limit accordingly.
A phone call to your bank is all it takes to reduce the limit. Some banks make it just as easy for you to increase the limit. For example, on Standard Bank’s new internet banking site, customers can increase the limit to R500 000. If you’re uncomfortable with that, and the obvious risk it poses to you in the event of fraud, you can revert to using the bank’s old site.
Many people use their home loan accounts to stash extra cash – in other words, they pay more than they’re required to each month. But in order to access this money, you need what is generically known as an access facility. This enables you to draw any “pre-paid” funds (surplus), but not “repaid funds”.
If you want to protect the pre-paid funds in your home loan, consider deactivating your access facility. But first check with your bank that you will still be able to transfer extra funds into your home loan account.
FNB and Standard Bank allow you to deactivate the access facility and you are still able to pay extra into your bond, but you can’t transfer funds out of it. This safeguards you in the event of online banking fraud. If you need to access any pre-paid funds, you can apply to the bank to reactivate the facility.
WHAT THE NCA SAYS ABOUT CREDIT LIMITS
Increases in credit limits are governed by section 119 of the National Credit Act. Advocate Clive Pillay, the Ombudsman for Banking Services, says the section provides for the following situations:
* A temporary increase in your credit limit on condition that the original credit limit will apply after a specified period. In this case, a new affordability assessment does not have to be conducted. For example, your overdraft facility is R3 000 and you’ve used R2 500. You need R1 000 to buy school uniforms. You call your bank and ask for your overdraft to be increased by R500 until your salary has been paid. Your limit will revert to R3 000 on pay day.
* If you orally or in writing ask your bank to increase your credit limit permanently, a new affordability assessment must be conducted.
* If you agree to an increase in your credit limit in response to a written proposal by your bank, your credit limit may be increased, but a new affordability assessment must be conducted before extra credit is granted to you.
For example, you receive an SMS from your bank offering to increase your credit card limit. If you ignore it, your limit will stay the same. If you accept the offer, the bank must carry out an affordability assessment.
* Your bank may increase your credit limit if, when you apply for a credit facility or at any time thereafter, you in writing opt for automatic increases from time to time. This increase is subject to two conditions:
–– The authorisation to increase your credit limit must be separate to your credit agreement. This is an attempt to ensure that you understand the implications of giving the bank this authority.
– The increase can be applied only once a year and by an amount not exceeding the lesser of the average monthly purchases or cash advances (withdrawals) charged to your credit facility (in the preceding 12 months), or the average monthly payments made by you (in the preceding 12 months).
For example, you have an overdraft facility and you have authorised the bank to increase the limit automatically. If your overdraft is R10 000 and the average monthly spend on your overdraft is R10 000, your limit can be increased by no more than R10 000.
But if you are paying, on average, only R5 000 a month on the overdraft, the bank can’t increase your limit by more than R5 000.
Be very careful when giving your bank such authority, Pillay says.
Debt counsellor Philip Nortjie says automatic credit-limit increases can easily result in over-indebtedness and could be reckless lending, because no affordability assessment is required.
Your bank will never ask you to log into your internet banking profile via a link in an email. This is a common ploy by fraudsters. They are subtle. They may send you an email that appears to be from your bank’s loyalty rewards programme, asking you to update your personal information. Or an email that is ostensibly from the South African Revenue Service, prompting you to claim a refund from the taxman. In either case, there will be a link embedded in the email. Don’t click on it. If you have even the slightest suspicion that, by clicking on a link embedded in an email, you might have compromised the safety of your bank account, deactivate your online banking profile immediately.
Guard your banking details – and guard your bank card, too. If an ATM retains your card, cancel the card on the spot. And if an ATM looks like it has been tampered with, don’t use it.
YOUR BANK’S COMMITMENT TO YOU
“To provide reliable banking and payment systems services and take reasonable care to make these services safe and secure.” This is your bank’s “key commitment” to you, in terms of the Code of Banking Practice.
Similarly, you are required to take “due and proper care” when you bank.
The banks are quick to remind you of your failure to take due and proper care when you have fallen for a phishing attack. But you should be mindful of the bank’s commitment to you, Clive Pillay, the Ombudsman for Banking Services, advises.