6 ways to reduce your bank charges & interest rates

Be honest: How closely do you look at your bank statement? Do you glance at it and think it looks about right, or go through it with a fine-tooth comb? If you take a close look, you might find some bank charges on your statement that you weren’t aware of! And if you change your banking habits, you can reduce not only these costs, but also the amount of interest you pay on an overdraft, credit cards and loans.

We took a look at six banks’1 account charges for transactional or current accounts and found six ways you can reduce or save on your bank charges and pay less interest.

1. Bank online or via an app

Where you do your physical banking makes a big difference to your banking costs. It is cheaper, by far, to bank online or via a banking app. Banking at an ATM is also a fairly cheap option (not as cheap as online), as is banking at a retail partner of your bank such as Checkers or Pick n Pay. But if you bank at a branch you will be paying high fees.

Did you know that even getting a statement from your banks branch can cost 20 times more than getting a statement online or at an ATM? Withdrawing money in a branch can cost four times more than at an ATM, plus you pay a once-off fee of over R50!

Top tip: Find out the costs of where you bank, and can bank, and opt for the cheapest and safest option wherever possible.

2. Know which transactions are free and which are paid for

“My bank charges me a once-off monthly fee that includes everything,” you say. Um – not always! Most bank accounts have a once-off monthly admin or service fee that includes some transactions only. Very rarely are all transactions included.

For example, your monthly fee may allow you to withdraw up to R4 500 each month at no cost. Withdraw more and you pay additional transaction fees.

Top tip: Check what is included in your bundle of services. Look for how many debit orders, deposits and withdrawals are included and up to how much, so you know when you will pay extra and can take steps to avoid higher charges. For example, find out from your bank if there are options to change your admin fee and qualify for more free debit orders.

Also note that many of the following transactions may attract a small fee as they are not usually included in bundle costs:

  • Lotto or Powerball purchases
  • Payment notifications (SMSes in particular)
  • Immediate payment clearance
  • Prepaid electricity, data or airtime purchases

3. Practice good banking habits

You will pay an extra charge, sometimes more than R100, if you:

  • Lose your card and need a replacement
  • Let a debit order bounce
  • Need old (+12 months) bank statements
  • Deposit and withdraw cash at least once a week

Try and avoid incurring these charges. Keep your card safe, and if you think a debit order is going to bounce because of insufficient funds, ask the company submitting the debit order to stop it (in good time) or ask your bank to stop it. The last thing you need when funds are tight is to have to pay an extra R65 for a bounced debit order! And try to limit the amount of cash you use – rather use your debit card!

4. Don’t pay for an overdraft if you don’t use it

Overdrafts can be very useful, but they come at a price: usually over R50 a month. Pay that every month for a year and you’ve paid R600, which could come in very handy for other things you need. So unless you need and use an overdraft, opt for a fee option that excludes overdraft charges, or an option that only charges on a pay as you use basis.

5. Find out what discounts are on offer

You may qualify for reduced charges or a higher interest rate on positive balances if you maintain a minimum balance or are over a certain age. Reaching the age of 50 and/or 60 brings some banking benefits! If your bank account regularly has a positive balance of a few thousand rands and/or you have reached 50 years, ask your bank if you qualify for discounts or better rates or if there are bank accounts with these options.

6. Reduce your interest rate to pay less interest

You can qualify for a lower interest rate, which will save you money, if you:

Make sure you don’t pay more than the maximum interest rate
According to the National Credit Act, regulated credit providers can only charge maximum interest rates for different types of credit including home loans, personal loans, store cards and credit cards. For example, the maximum amount you can be charged on a credit card is 17.5%.

This changes when the interest rate changes, so if interest rates go up, the maximum amount charged can go up. You can check maximum rates on the National Credit Regulator website, or call them to find out the maximum rate for your type of credit. If you are paying too much, ask your credit provider to reduce the interest rate accordingly.

Unregulated credit providers such as mashonisas and loan sharks can charge any interest rate, so if you can, avoid borrowing money from these providers.

Negotiate a lower rate
You can ask your bank for a lower interest rate for your loan or credit facility. Your request is more likely to be granted if:

  • You have a good credit record. Pay your debts on time, and work on clearing some debts such as a store card to keep your credit record in the best possible shape. This shows you manage credit well – information you can use to ask your bank to reduce your interest rate on credit cards, overdrafts and loans.
  • You have a deposit for a large item. Save for a deposit on a car or home and you will demonstrate that you are committed, manage money well and can save money for things that are important to you. This shows your bank or lender that you really want the item or property, which makes you less likely to default on credit payments. This makes you a low credit risk to the bank, and they can offer a better credit rate on the loan you are applying for.

Remember: You have to ask! Even if you have a great credit record, don’t assume your bank will automatically take this into account. Always ask your bank, and/or other banks, how you can qualify for the lowest possible interest rate.

Make a date with your bank statement!

Take some time to go through your bank statement each month to make sure you are not paying for services you don’t use, and to find ways where you can save on bank charges. And keep revisiting your debts and interest rates to see how you can save on interest too. You could save more than R500 a year!

 

1. Absa, African Bank, Capitec, FNB, Nedbank, Standard Bank

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