More Transparency on South African Banking Fees Needed

ATM

South African banks charge fees for more services than their international counterparts and are now facing future challenges as the transparency of these banking fees are being questioned.

For a long time, South Africans have bemoaned the high cost of banking in the country and it seems they now have the support of national consumer commissioner Mamodupi Mohlala-Mulaudzi who earlier this week questioned the transparency of bank fees – specifically the bank fees charged for withdrawals at ATMs.

Mohlala-Mulaudzi said, “We found that low income earners are most affected by these charges. People on social grants are also charged ATM fees. People who get grants should not be expected to pay these charges.”

In a recent report by the National Consumer Commission, it was recommended that banks display withdrawal fees on ATM screens before the customer concludes their transaction. Mohlala-Malaudzi stated that people need to know how much they are being charged.

South African Banks Charge More

The commission seem to be supported in their findings by the ombud for banking services, advocate Clive Pillay. Pillay said that South African banks do charge more for services and charge for more services than their international counterparts.

While the banks do offer options on certain accounts to have monthly transactional packages which allow for a certain amount of free transactions, the basic withdrawal fees are as follows:

  • Absa charge R3.85 per withdrawal with an additional R1.10 per R100.
  • Nedbank charge R3.50 per withdrawal with an additional R1.20 per R100.
  • Standard Bank charge R3.90 per withdrawal with an additional 1.17% of the value drawn.
  • Capitec charge a flat rate of R4
  • First National Bank charge R5.70 per R500

In addition to these charges, if a customer should use an ATM that does not belong to their bank, they can expect to pay even more, sometimes up to double the normal rate.

When faced with complaints about these charges, banks have responded by telling people that they can lower their costs by using their own ATMs or making fewer withdrawals of larger amounts.

International Comparisons

These fees are in stark contrast to those of banks overseas.

U.K. Bank, Barclays, charge no transactional fees on their own ATMs. Transaction fees are charged on withdrawals from non-Barclay’s ATMs, however, an on-screen warning is given before a customer completes the transaction.

In the U.S., the Bank of America charges customers a monthly transaction fee which can be avoided through various options the bank offers. They also have no withdrawal charges except at non-Bank of America ATMs where there is a flat $2 charge.

Meanwhile in Australia, Australia’s largest bank, Westpac, has no ATM fees at all, whether you use a Westpac ATM or not.

Defence of Local Practices

The managing director of the Banking Association of South Africa, Cas Coovadia, has leapt to the defence of local banking practices stating that the fees and charges must be considered within the environmental context.

Coovadia stated that while the steep competition among the local banks will lead to the dropping of prices, there is no such thing as “free banking”. He said, “Banks are commercial entities that need to earn a reasonable return to provide services they provide and to maintain and increase shareholder investment. Any cost-free service in one area has to be made up through increased costs in other areas.”

While the banks do have some fair arguments for their price structures, it’s becoming clear that they will need to make some changes to keep the public happy, otherwise people may begin saving their money under their mattresses which don’t charge for withdrawals just yet.

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