In response to this week’s 100 basis point cut, Capitec has announced that it will pay only 50 basis points less in interest on positive balances in transactional accounts and flexible savings plans.

When the Reserve Bank cuts the repo rate, borrowers pay less interest on credit and loans, but savers earn less interest on their deposits.

Capitec’s concession follows a more generous one from TymeBank in March when it announced it would keep its best interest rate at 10% after the central bank cut the repo rate by 100 basis points then.

Since the beginning of 2020, interest rates have been slashed by 2.25 percentage points.

TymeBank pays savers 6% interest from day one, 7% after 30 days, 9% after 90 days and 10% if you give the bank 10 days’ notice of any withdrawal after 90 days.

Imploring consumers not to panic, TymeBank’s chief strategy officer Greg Illgner said now is not the time to make any rash decisions with your money. Money in a savings account that pays a high interest rate is one of the safest places to keep it.

“Your money is still very safe in the bank, there’s no need to withdraw it. SA’s banking industry is respected around the world. If you are with a well-regulated bank, take comfort knowing that our business has been built for times like these.”

Capitec customers earned more than R2.3bn in 2019 in interest on transactional accounts, Francois Viviers, the bank’s executive of marketing and communications, says.

Capitec pays interest from 3% a year on daily balances.

Viviers says the cut in the repo rate means that your household may benefit from extra disposable income, giving you some good opportunities.

Pay off your debt faster

The decrease in the repo rate means that your monthly instalments on credit with flexible interest rates will decrease. For instance, someone with a R1m home loan will now pay roughly R620 less a month, he says.

While it may be tempting to use this money to improve your lifestyle, rather continue to pay off your debt as if the interest rate change had not taken place. Paying off a loan faster means that you’ll save on interest. Your future self will also thank you for those few fewer months of loan instalments, which can be used to invest in your future or for things you actually enjoy.

Viviers advises you to pay off credit with higher interest rates first. “Store and credit cards often have high interest rates when compared to other loans. Pay these off first to maximise your savings and where possible move to simpler and more affordable options”.

Start that much-needed emergency savings

Build enough savings to cover expenses for at least three months. Having a rainy-day fund protects you from dipping back into debt each time there is an unexpected expense. Also be sure that your money’s working for you by placing it in a savings plan that offers you the highest possible interest rate.

Pay your future self

Use your bank’s app to set up a recurring monthly payment into a savings plan. Once you’ve built up a sizeable nest egg, you can use this money to buy a new household appliance, to purchase a new computer or even kick-start that side hustle you’ve been dreaming about.

Study further

A recent poll shows that 21% of South Africans name furthering their education as a savings goal. Use the monthly saving towards studying further, which could earn you a promotion or the opportunity to apply for a better job.

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