What are you, as a senior, paying in bank fees?
If you are a so-called “senior citizen”, how well served are you by your bank? Perhaps you should have a close look at your bank statements, because, even if your account is specially tailored for seniors, you may be paying high fees.
On the face of it, the banks appear to be benevolent to seniors. They offer attractive-looking transactional packages and preferential interest rates on fixed deposits. But it’s probably less a case of “we want to be generous to older people” than “we want the benefit of your savings and your reliability” – in other words, they aren’t in it for charity.
Each of the big four banks – Absa, First National Bank (FNB), Nedbank and Standard – has a specialised transactional package for people aged 55 and over (see “Banking packages for seniors”, below). But there are catches: lower or zero costs are mostly conditional on you maintaining a fairly substantial minimum balance in your account, or a substantial amount in a linked savings account. Another condition of avoiding high charges is that you make use of technology.
So how do the banks compare? Not all pensioners have substantial savings that they can use to maintain a high minimum balance. And many older pensioners are set in their ways, including banking the old-fashioned way: not able, or inclined, to use electronic channels such as the internet. They are among the most vulnerable in our society and, given the high crime rate, may justifiably be afraid of withdrawing cash at an ATM, preferring to go into a branch.
In addition to the “big four”, we have included Capitec, which does not have something specifically for seniors, but offers a competitive package.
For the purposes of this survey, Personal Finance uses a hypothetical pensioner who receives a pension of R15 000 a month. In addition to this, a relative sends him a monthly cheque of R1 000, which he must deposit. There are four debit orders a month from his account for fixed expenses, such as medical scheme cover, insurance, satellite TV and accommodation. The pensioner also makes four payments a month for regular variable expenses, such as telephone and pharmacy bills. He makes four R500 cash withdrawals and uses his cheque/debit card eight times a month when shopping.
With what little remains at the end of the month, he transfers a few hundred rands into a separate savings account with his bank. He is sent a monthly bank statement.
How this pensioner manages his account affects his costs significantly. Take these three scenarios:
* Scenario A. The pensioner can afford to keep R15 000 in a linked savings account or as a minimum balance. He is technologically savvy and uses electronic banking channels, such as the internet. He draws cash and deposits cheques using his own bank’s ATMs.
* Scenario B. The pensioner uses electronic channels to transact and uses his bank’s ATMs for cash withdrawals and cheque deposits, but he cannot afford the minimum balance required to qualify for a reduction in fees on his package.
* Scenario C. The pensioner cannot afford the minimum balance required for a reduction in fees and has not found his way around electronic banking: he uses a debit card when shopping, but he writes out cheques to pay his bills and embarks on a weekly trip to his local bank to withdraw cash and do other transactions. He receives his monthly statement by post.
Assumption: For purposes of calculating interest, the average daily (not minimum) balance in the transactional account is R6 000, except in the case of scenario A, if the pensioner holds his spare R15 000 in his transactional account.
WHO’S BETTER OFF WHERE?
The accompanying table (click on link, “Pensioner’s bank charges”, below) shows the monthly banking costs in each scenario, according to the banks’ 2015 pricing structures.
* Scenario A. At four of the five banks, the pensioner actually makes money, through interest on the R15 000. There are either no charges, or the interest earned offsets the charges (except at FNB, where his low interest in the Savings Pocket doesn’t quite offset his R20 cheque deposit fee). He scores R82.50 a month at Absa, R81.25 at Nedbank, and R35.20 at Capitec.
Standard Bank clients receive no interest on the balance in their transactional account, so, although he is entitled to a rebate on his R45 service fee by maintaining a balance of R10 000, it is preferable to pay the monthly R45 and get R84.37 interest on R15 000 in an electronic Consolidator 12-month fixed deposit, which would net him R39.37 a month.
* Scenario B. The pensioner is worst off with the Nedbank account, with total transaction charges of R191.60. He is best off at Capitec, because the R22 interest he earns on the average daily balance of R6 000 offsets his fees, to the extent that he pays only R39.80 a month. The Standard Consolidator Plus bundle is also a good option for this pensioner – the R45 monthly service fee covers all his transactions.
* Scenario C. The pensioner pays very high charges, ranging from R181.25 a month at Standard to a whopping R547.80 at Absa. His charges for over-the-counter cash withdrawals are high, particularly at Absa (R47.50 a withdrawal), Nedbank (R36.40) and Standard (R34.25, but he gets two free).
Capitec does not offer cheque accounts, so it is not an option for this pensioner, unless he finds ways around having to pay bills by cheque.
BANKS’ SUGGESTIONS TO REDUCE YOUR FEES
All the banks say that you need to speak to them, because they will help you to determine the most cost-effective option for your needs and circumstances. Sometimes, as in the case of Nedbank (see below), you might be better off using a regular, non-senior option.
Absa makes the point that, with its Flexi Account for Seniors, you don’t have to maintain the R5 000 balance for the entire month in order to benefit. Transactions performed while the balance is R5 000 or more will be free of charge, and you pay fees on transactions only when the balance goes below the R5 000 threshold. That means that for perhaps less than half the month, the pensioner in scenario B would have less than R5 000 and have to pay fees. So the charges for this pensioner would probably be lower than those reflected in the table.
However, the pensioner in scenario C needs to use cheques, which he cannot do with the Flexi Account (a transmission, not a current, account). So he would have to use the Prosperity Account but without the benefit of the rebates for a high minimum balance.
Absa says the behavioural profile of the scenario C pensioner is the exception rather than the rule, and that less than 0.1 percent of its customers over the age of 55 transact in this “inefficient” way. Importantly, it says, seniors also have access to its Gold Value Bundle. The pensioner could have paid R490.60 a month and had the advantage of all the added benefits of the bundle, the bank says.
Arrie Rautenbach, the chief executive: Barclays Africa Retail Banking, suggests the following ways in which the pensioner in scenario C can reduce his fees:
* Do not accept cheques as a form of payment. Ask to be paid via transactions such as an electronic funds transfer (EFT), which reflects within seconds on your account. These are much safer forms of receiving payments and are free, he says.
* Instead of using the branch for cash withdrawals, make use of till-point (point-of-sale) withdrawals at major retailers, such as Shoprite, Checkers, Pick n Pay and Spar.
* Instead of writing out cheques, use telephone banking to make payments, at a fraction of the cost. An alternative is to make payments to merchants via point-of-sale terminals using your debit card.
Rautenbach says that, just by following these steps, the pensioner in scenario C at Absa can save R360.20 (66 percent) in charges.
In its response to the survey, Nedbank says it offers other products to all clients, including seniors, that are much more affordable if you cannot maintain R10 000 in a linked investment product. Based on a needs analysis of the pensioner in scenarios B and C, Nedbank recommends that they switch to the Savvy Plus account. Using the same bundle of transactions, the pensioner’s monthly fees would be:
* Scenario B: R109.00
* Scenario C: R253.00
BANK PACKAGES FOR SENIORS
Listed below are the features of banks’ offerings for over-55s. Note that some features are offered on other, regular accounts, so not everything is a special benefit to seniors. The cards used are debit or cheque cards – credit cards are normally catered for separately and may be an optional extra (at Standard Bank, a credit card is included in the Consolidator Plus bundle). Also, benefits linked to banks’ rewards programmes, such as eBucks, have been excluded, as have benefits such as preferential rates on insurance. The information is from the banks’ respective websites.
* Flexi Account for Seniors. This is a pay-as-you-transact transmission account with the same pricing structure as the Flexi Account for under-55s. However, if you maintain a balance of at least R5 000 throughout the month, you receive the following concessions:
- The monthly R15 administration fee is waived.
- You don’t pay fees on: cash withdrawals at an Absa ATM or a point-of-sale; point-of-sale purchases; account payments at an Absa ATM; debit orders and stop orders; fund transfers at an Absa ATM; CashSend from an Absa ATM; balance enquiries at an Absa ATM or a point-of-sale; mini-statements at an Absa ATM or full statements at a branch; or SMS or email notifications.
- A free debit card.
* Prosperity Account. This is a current account for people of 55 years and older who have an income of more than R2 000 a month. If you can afford to invest R15 000 or more in one of Absa’s investment accounts, including its fixed deposits of a year or longer, you have access to the Prosperity Rebate Banking option, where you receive up to R500 a month of daily banking transactions free.
Among other things, you get:
- A debit card.
- Online, cellphone and telephone banking.
- A free NotifyMe service that alerts you whenever there is activity on your account.
- International banking, with no fees on international pension transfers of less than R10 000 a month.
- Professional assistance in drafting your will, at no cost if you are over 60.
- Up to R500 a month of banking services free of charge, including over-the-counter transactions at your branch, which are normally pricey, and cheque books. (For a full list of the transactions that qualify, go to the Absa website.)
- Concessions on most transactional charges on internet, telephone and cellphone banking.
* Preferential savings rates. All seniors qualify for an additional 0.5 percent on fixed deposits for terms of 12 months or longer for amounts up to R100 000.
First National Bank
* Encore Portfolio. a collection of products and services for clients aged 55 and over who earn more than R24 000 a year. On your cheque account (which may be Gold or Platinum – see below), there are two pricing options:
- Unlimited option. Unlimited qualifying electronic transactions and four free FNB ATM withdrawals a month for a monthly fee of R95.
- Standard option. This is the default option. Your monthly account fee is waived if you maintain a balance of R5 000 or more in your cheque account or have R10 000 or more in a linked Savings Pocket account. You receive unlimited qualifying electronic transactions, four free FNB ATM withdrawals a month and a combination of three free branch, cheque or consultant-assisted telephone transactions a month.
On both options, you receive:
- An FNB Visa cheque card;
- 50 percent off your credit card fee (including Petro Card)
- A free Savings Pocket (with preferential interest rates);
- The free drafting and registering of a trust deed or will and free safe custody;
- Emailed statements;
- Free subscription to inContact and FNB’s electronic channels; and
- Free debit orders and scheduled payments on FNB electronic channels.
Some of the fees are high, however. If you order a cheque book, it will be couriered to you – at R240 for both the cheque book and courier fee. A replacement card will cost you R115, and the card courier fee is R95. And if you need a consultant’s help to reset your password for online banking, you’ll be charged R55.
* Preferential savings rates. Seniors get an extra 0.5 percent on fixed deposits of 12 months or longer. Encore Savings Pocket rates are between 1.25 and 4.15 percent on amounts over R10 000.
* Optimum Current Account. This is a pay-as-you-transact current account that offers reduced service fees and selected free transactions if you have a balance of R10 000 or more in a Nedbank fixed deposit, notice deposit or JustSave Account (excluding deposits in Nedgroup Investments).There are no monthly service fees, and the free services include:
- Unlimited cheque deposits at Nedbank branches and ATMs;
- Four over-the-counter cash withdrawals every month;
- Unlimited cheque payments;
- Cheque books;
- Unlimited inter-account transfers and third-party payments via self-service banking channels (Nedbank cellphone, telephone and internet banking);
- Unlimited debit and stop orders;
- Unlimited cheque and debit card purchases;
- First balance enquiry of every month at Nedbank branches;
- Unlimited balance enquiries at Nedbank ATMs, self-service terminals and via self-service banking channels;
- One statement a month at Nedbank branches;
- Unlimited statement enquiries at Nedbank ATMs and via internet banking.
- Self-service banking subscription.
This account also offers you:
- A gold or classic cheque card for purchases and drawing cash;
- A personalised cheque book;
- A garage card to fill up your car and help pay for vehicle-related expenses; and
- Free access to the bank’s Personal Money Manager, an online budgeting tool for internet banking users that allows you to track your income, expenditure and fees on your account.
* Preferential savings rates:
- Nedbank Seniors Green Bond for people over 60: minimum deposit of R1 000 for 18, 24, 36 or 60 months at 0.1 percent to 0.15 percent above the regular Green Bond; and
- OptimumPlus Fixed Deposit for over-55s: an extra 0.4 percent to 0.7 percent on deposits with a term of 12 months or more.
* The Consolidator Account has three pricing options:
1. Pay-as-you-transact, which offers discounted fees on certain transactions, free cheque card swipes and a free subscription to internet banking.
2. Consolidator Plus. You pay a fixed monthly fee of R45, which includes:
- Three AutoBank cash deposits a month;
- Six AutoBank cash withdrawals;
- Two branch cash withdrawals, including cheque encashments;
- Four cheques issued or deposited;
- Unlimited sendMoney transactions using cellphone banking;
- Unlimited electronic transactions (including account payments, inter-account transfers, debit orders and stop orders) and electronic balance enquiries and mini-statements;
- Free internet and emailed statements;
- Free SMS notifications;
- A free cheque card; and
- A free credit card.
The R45 service fee is waived if you maintain a balance of at least R10 000 for the full month.
3. Rebate option, where you get a rebate on qualifying bank charges depending on the minimum balance in your account. The rebate ranges from R85 for a balance of R10 000 – R19 999 to R420 for a minimum balance of over R100 000.
On all three options, you get free, non-carbonised cheque books, but you’ll pay R125 to replace a cheque card.
* Preferential savings rates. Over-55s receive an extra 0.5 percent on deposits of a year or longer in the Senior Citizen and Consolidator fixed deposits.
Capitec does not have a special account for seniors, because it believes it offers the best banking value to customers of any age. The monthly fee for its Global One transactional account is R5, and you pay charges as you transact. You can link your savings accounts to your transactional account, and on all accounts you earn at least 4.4 percent interest. The only condition regarding minimum balances is that you must have at least R25 in your Global One account.
Global One account holders have the following benefits:
- A free debit card;
- Free online, cellphone and app banking;
- You can open savings accounts and transfer funds among all your accounts, at no extra administration fee; and
- Favourable interest rates, even on your transactional account, which means that the interest you earn in a month could cover your bank charges.
However, Capitec does not offer cheque books, and does not have overdraft or credit card facilities.