Bank Like A Banker
Hospitality Partners Association
Financial Services, Legal Services
In the following paragraph, we’ll be asking you three questions. For each of them, answer either ‘yes’ or ‘no’. When you set out to buy new shoes, do you generally tend to browse around and compare the options at different stores before making a purchase? When you buy a new car, do you compare the costs of various models before taking the plunge? When you order food at a restaurant, do you check the price of a meal first before telling the waitress what you want?
Now here’s the trick question: Do you apply the same principles in terms of banking? Because whether you answered yes once, twice or three times in the above paragraph, the principle stays the same – banking is part of your monthly expenses and only by comparing costs and shopping around for the best deals will you really be able to save on those nagging fees.
Here are ten expert tips to get you started:
1. If you own a business, however small it may be, for which you need a credit card machine, make sure you have the best possible deal on that credit card facility.
According to Suzette Van Niekerk from Exceed Asset Management, you can halve your monthly fees by being smart about your choice. “Bear in mind that a monthly rental fee comes into play, that there is a contract fee and that you also pay an amount (up to 5%) on every transaction. These costs differ from bank to bank so compare prices before committing to one which may be pricier than most.”
Many businesses add these bank fees to the total invoices of their clients, which can also be avoided by getting the best possible deal. “Whether you run a guesthouse or own a panel-beating shop, you can save a lot and also offer your clients the best possible service with some shrewd planning,” says Van Niekerk.
2. It doesn’t matter whether you’re a dab hand with the internet or not, it’s definitely worth your while to start using online banking, as you can make great savings on various transactions this way.
For example, says Van Niekerk, “an internet transfer is often far cheaper than making a deposit at the nearest branch of your bank, and also a lot more affordable than paying by cheque”. She adds that cash is not necessarily king either, as fees are involved with first drawing the money and secondly with paying it into an account – whereas one online transfer could streamline the process, without costing an arm and a leg.
3. Debit orders are wonderfully simple and easy as they allow you to forget about lots of paperwork and payments, and ensure that payments are made on time.
However, different banks charge different amounts for debit orders so find out what you are currently paying and start comparing it with other banks’ fees.
4. Save, save, save – it’s the first thing any banker will advise you to do, even when times are tough.
Actually, financial experts strongly advise saving especially when times are tough. “The fact that the world is emerging from the economic downturn is good news – but most of us have had a tough couple of years, financially, and would welcome a breather,” says Sugendhree Reddy, director of banking products at Standard Bank. She adds that a good way to free money up to clear debt – and hopefully eventually save – is to re-examine your insurance policies.
“You’re probably still paying premiums on assets you no longer have or are still insured for more than the market value of your car. Once you’ve adjusted the premiums, use the money you’ve saved to either bolster your savings account or pay off debt. And just keeping working towards having more savings than debt,” she says.
5. If you’re a pensioner, be sure to investigate the perks available to you, and insist on making use of them.
Many banks offer incentives such as low or no bank fees on certain fixed amounts in a bank account, and it’s a good idea to find out if your bank adjusts these numbers when interest rates go up or down.
6. Make sure you understand the difference between the various types of accounts.
“Many people still don’t understand that you don’t get any interest on money in a cheque account, so when it comes to funds which are not part of your monthly deductions, it would be far better to put it in a savings or money market account,” says Van Niekerk.
7. To support your medium-term goals, like buying a car or putting a deposit down on a property, it’s a good idea to put your money into either a fixed deposit or a money market call account.
“A fixed deposit gives you a good interest rate and you have to give notice when you want to take your money out – making it ideal for medium-term savings,” says Reddy, adding that, “a money market account can have an even higher rate, but it still allows you to access your money quickly. This is a good option for saving, but you have to be honest with yourself about how disciplined you will be about leaving your savings to mature.”
8. Be vigilant when you open new accounts and, even though it may seem boring, take the time to read the fine print.
“Often fees are involved, such as a starting fee and on-going fees on accounts like a money market account, and these are collected automatically,” says van Niekerk. If you’re unsure, ask your banker to explain in detail what all the relevant fees are which will be deducted directly and decide on the back of that whether the account is worth your while.
9. When you draw cash from an ATM, do you know what the charge is for every withdrawal?
You may think you’re saving money by drawing (and subsequently spending) only small amounts at a time, but once you’ve considered that you actually pay anything from R5 to R11 per withdrawal, it suddenly would make a lot more sense to rather draw one larger amount weekly instead of small amounts every other day.
However, things do get more complicated the more you draw too, and at some banks, the charges for drawing R600 can be double that of drawing R500. This is just yet another incentive to spend some time finding out exactly what deal your bank is offering you, and what every single transaction – even an ATM withdrawal – costs.
10. Children of bankers and financial experts tend to be well versed in the art of shrewd money management, but there’s no reason why your kids can’t enjoy the same benefits.
“The lessons of money management are best learnt when young,” says Reddy. Most banks accommodate youngsters and their specific banking needs (such as the Standard Bank Sum1 account), allowing them to graduate from piggy-bank savings to formal banking.
Having an account teaches children the basics of transacting on an electronic account – and accounts like these involve little or no banking fees. It’s also a great way to teach children about savings, and seeing how they earn even small amounts of interest can be a huge incentive for smart money management.
The business of banking has changed dramatically over the last few decades, and long gone are the days of hiding your hard-earned cash under the mattress. It seems that more often than not, electronic transfers are the way to go (and far cheaper to boot), and in the absence of conformity when it comes to various banking fees, shopping around for the best deals definitely pays off in the long run.
The article was originally written by Riekie Human - RCS Lifestyle, March 2011, who interviewed Suzette van Niekerk.
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