Fused accounts offer you banking and credit all in one
Integrating a transactional account with a credit card is not new, but it is becoming more popular
Bank accounts that integrate your transactional account with a credit card are not new, but they’re becoming more popular, with Discovery Bank now offering them and Nedbank launching one earlier in March.
Nedbank’s Professional One account functions as a transactional account that pays interest on a positive balance and earns Greenbacks rewards when you spend. It attracts one monthly fee and includes a credit card and/or overdraft facility.
The distinguishing feature of these accounts is that the credit facility is included in the account, and therefore you don’t pay an initiation fee, separate monthly fee or credit facility fee as you would if you had a stand-alone credit card. And with a regular overdraft facility, you are typically charged a monthly fee for the facility whether you use it or not; when you do, you incur interest charges immediately.
The Professional One account comes with perks such as a personal banker, preferential investment rates and unlimited visits to local airport lounges.
Though there’s no income threshold, the account is aimed at young professionals (under 30s with a four-year qualification get 50% off their monthly fee) and customers aged 55 and up with an average monthly balance of R300,000 in any Nedbank investment. The monthly fee for the former is R180 and for everyone else it's R360.
In this way, the Professional One is similar to Investec’s Private Bank Account, which is aimed at young professionals and those who earn at least R800,000 a year.
What makes Investec’s Private Bank Account unique is that it’s a credit card account with current account functionality, says Ilze Wagener, the head of product for Investec Private Banking.
Investec was the first to market with a “one account”-type product, which was launched in 1999, Wagener says.
The account gives you 45 days interest free on credit card purchases. Any deposit, including a salary, is applied towards any outstanding amount. The timing of the deposit affects the calculation of the interest-free period.
When it comes to bank fees, you need to weigh factors: what rates are you paying on borrowing; what rates are you getting on deposits and what are your transaction fees? Now offset that against the benefits from the various programmesBarry Hore, CEO of Discovery Bank
It also comes with a revolving credit facility with a minimum monthly repayment rather than one where you are required to pay the full outstanding amount each month.
Other benefits include complimentary access to the Investec rewards programme and complimentary basic travel insurance when buying international travel tickets.
The account attracts an all-inclusive fee of R535 a month covering day-to-day transactions, such as EFTs and debit orders, credit card facility fee, unlimited local and international ATM withdrawals, card purchases, statements and purchasing of airtime, data or prepaid electricity. Even if you make card purchases, you will earn interest on a positive balance until the next statement date.
With Discovery Bank, there’s no income threshold for you to qualify for an account, the most expensive of which — the Black account — costs R440 a month, including a Vitality Money premium.
Discovery Bank CEO Barry Hore says when it comes to bank fees, you need to weigh various factors. “What rates are you paying on borrowing, what rates are you getting on deposits and what are your transaction fees? Now offset that against the benefits you get from the various programmes.”
In Discovery’s case, the programme is Vitality Money, which is integral to the bank’s offering, he says.
Hore describes the bank’s accounts as an “integrated” offering — one system on two separate “rails”: the transaction rail and the credit card rail. “About 90% of electronic transactions, we can do off a credit card [rail]. We don’t have to push you into a transaction account or vice versa. It’s up to you and the shape of your life and if you wish to have a credit card which you then transact off.”
If this sounds confusing, you aren’t alone. Hore says some customers battle to conceptualise the offering.
Robert Gwerengwe, the CEO of the Gold Segment at First National Bank, says the same of FNB’s Fusion offering. Essentially it’s a transactional account with extras, he says.
With Fusion, the cheque account, overdraft and credit card are “fused”, offering you one account and one card. You can deposit your salary into the account, run debit orders off it and swipe. “That’s the structure of it. You save on monthly fees, get higher eBucks rewards from swipes and have a [credit] balance to fall back on. You also have a 30-day interest-free period [on credit card transactions] and there’s no cost for the credit card facility,” he says.
“If you qualify, you get the product but don’t need to use it. It doesn’t cost you if you don’t use it.”
We have lots of conversations with customers where we feel they could manage their money betterRobert Gwerengwe, CEO of the Gold Segment at FNB
To qualify for the Fusion account, you must earn (before deductions) at least R120,000 a year on the Gold and at least R300,000 a year on the Premier.
Gwerengwe says a transactional account that’s fused with a credit card is no more or less dangerous than when these accounts are separate.
The Fusion limits are typically lower than the limits that apply to a stand-alone credit card.
“Some customers prefer a [separate] credit card. Say they want to buy a fridge and want to keep that transaction separate. Most who take the Fusion account also take the credit card, which they use for different purposes. Some take a personal loan because they don’t want credit that revolves.
“Our purpose is to be a trusted money manager, and we have lots of conversations with customers where we feel they could manage their money better. We may ask you why you took out a personal loan from us to buy a second-hand car when you could have obtained secured finance at a lower cost from WesBank. Some say that if they can’t pay the instalments, the car will be repossessed. But with a personal loan, they may be able to keep it and find another job.”
He says having a Fusion account with a stand-alone credit card and personal loan doesn’t necessarily mean you are not credit savvy. “It speaks to how they manage their finances. It makes sense to them. They need to have things separate.”
He says if you’re a reckless borrower, you wouldn’t be approved for a credit facility. But at the end of the day it’s not about which credit facility you use, it’s about your behaviour.