Banking cost drop. So who’s the cheapest of them all?

Since 2010, the real cost of banking has come down for consumers in most segments of the market, particularly those with mid-level bundle accounts, the latest findings by the Solidarity Research Institute show.

According to the SRI‚ which has been reporting on the cost of banking for the past eight years‚ the fees charged on mid-level bundle accounts have remained about R100 a month for the past several years.

A bundle account is one that attracts a fixed monthly fee for a limited or unlimited number of transactions and typically includes a credit card in the “bundle”. These accounts are popular and “marketed intensely to the middle class”‚ the SRI’s report notes.

Gerhard van Onselen‚ economics researcher at the SRI‚ said that while it was difficult to make exact comparisons of accounts over time – because of changes in the names and structures of accounts – “comparisons of inflation-adjusted costs of similar accounts over time suggest there have been large decreases in the real cost of transactional banking almost across the board”.

The SRI’s report carries a table showing that clients who do only a few transactions (12 and 17 transactions) a month‚ bank more cheaply‚ in nominal terms‚ this year than in 2010. But this is not the case for those who do more transactions a month (25 and 30).

SRI’s methodology is based on “user profiles” determined by the number of transactions by the customer in a month‚ rather than the income level of the customer.

Broadly‚ the higher the customer’s income‚ the higher their expenditure and number of transactions in a month.

This year’s report shows that for a customer who makes only 12 transactions a month‚ the Absa Transact is the cheapest account at R26.85 a month. But a Capitec customer‚ who doesn’t earn interest on a positive balance‚ would pay bank charges of R34.10 a month‚ which is R2.25 less than this customer would have paid‚ in nominal terms‚ in 2010.

“Nominal comparisons only tell part of the story‚ however. The purchasing power of the rand has been eroded significantly through inflation from 2010 to 2017. To buy the same basket of goods one could buy with R100 in 2010‚ one would need more than R145 today. In other words‚ if a bank charged R100 a month for an account in 2010 and R100 for the same account in 2017‚ its fee in 2017 is actually 31% lower than in 2010 in real terms.”

The report gives the example of Nedbank’s Savvy Electronic account and Nedbank’s Savvy Plus accounts‚ both of which came in as the cheapest accounts in 2010 and 2017‚ respectively‚ for customers who do 25 transactions a month. In 2010‚ these customers would have paid bank fees of R87.90 a month and in 2017‚ their bank fees would have been R100 a month.

“In nominal terms‚ the cost increased by 13.9%‚ but in real terms the Savvy Plus account is actually 21.8% cheaper than the Savvy Electronic was in 2010‚” the report states.

Although competition in bank fees has been stiff since the SRI began reporting on fees eight years ago‚ Capitec remains the cheapest bank - with its Global One account - for anyone who keeps just a few thousand rand average balance in their account‚ the report states.

“Capitec’s no-frills approach and the fact that it pays significant interest on any positive balance allow the bank to remain the likely first choice for a large section of the population. That said‚ Absa’s Transaction account has become a very compelling proposition. A client with a very low income who rarely‚ if ever‚ holds more than R2000 in their account would be able to bank more cheaply at Absa‚ using a Transact account‚ than at Capitec. The difference per month would be only about R5 to R10‚ but that is significant for someone with a very low income‚” the SRI reports.

“For someone earning a middle-class income‚ a Capitec account still offers significant savings on bank charges compared to the other banks’ accounts targeted at the middle class. At the higher middle class level‚ Absa’s Platinum Value Bundle beats all the others hands-down on costs.”