Banks should stop charging our kids
Angelique Ruzicka compares children’s transactional bank account fees and finds that they are difficult to understand and could deplete a kid’s savings rapidly if the rules aren’t obeyed or understood.
Reading and understanding the guides that explain the costs of children’s transactional bank accounts offered by the big four (Absa, Nedbank, Standard Bank and FNB) can be difficult. It makes one wonder whether these accounts are, in fact, designed for under 18s. They are, and yet the transactional fees, and the rules that accompany them, are not any simpler than the ones you’d typically encounter when perusing adult transactional account fee guides.
Incredibly children in South Africa, just like adults, pay to withdraw money, deposit money and in some cases pay a monthly account fee. This is in spite of the fact that most children under the age of 18 would hardly be earning an income, besides of course the pocket money they earn or get given by their parents, family members and friends.
Last year Moneybags did a simple comparison exercise of the children’s transactional bank accounts offered by the big four. This year we did the same comparison and what we’ve found is that little has changed.
Rip off bank fees for children?
If you or your child don’t read the fine print, their pocket money could soon be gobbled up. FNB, for example, still charge a monthly account fee of R24.50 for the bundled package and R6.25 for the pay as you use option on balances below R500 (see table below). This means that if a child were to deposit a mere R50 into the account (and left it there) they would have R1 left after two months and be R12.50 in the red after ten months with the pay as you use option. Meanwhile competitors Absa, Standard Bank and Nedbank don’t charge monthly fees, but Nedbank does however insist on a minimum balance of R10.
All of the banks charge our kids to withdraw and deposit money. Two (FNB and Nedbank) offer four free withdrawals a month but charge thereafter.
Deposit charges can eat up your child’s savings too if they’re not careful. Take FNB’s over the counter charges for example: R1.65 per R100 with a minimum charge of R50. So if your child deposits R100 over the counter half of it will get taken away thanks to bank charges. It means your child has to be savvy enough to realise that depositing money using an FNB ATM is a much cheaper option, as the bank then charges R0.70 per R100 with a minimum of R5.50.
When asked about this, FNB said: “Low value deposits attract a minimum charge due to the fixed cost components of cash as well as the high and rising costs of cash. In line with FNB’s ongoing strategy to migrate customers to more cost effective electronic channels (for both the customer and the bank), customers are encouraged to deposit cash (when they absolutely have to) at an FNB ATM advance which is much cheaper. A minimum charge of R5.50 applies for these transactions compared to R50 in a branch. There are floor walkers in our branches who actively advise customers to use ATMs rather than the branch teller and assist them with these transactions. Alternatively customers should request that monies are transferred electronically to their accounts which are free of charge.”
A cleverer (and cheaper) way to transact however would be to teach little Johnny to transact online. As Absa points out: “Youth customers, who bank smartly and make use of electronic or digital channels as opposed to traditional banking channels, are rewarded by banking free of charge.” Making an electronic deposit is free with FNB, Absa and Nedbank. Standard Bank allow kids to make eight free electronic deposits but then charges them R25 per transaction – rather cheeky when it’s a machine doing the work and not a person!
Interest on balances
Interest on balances is minimal. Only Nedbank offers a relatively decent 2.65% for its Nedbank4me account on any balance. FNB’s offers interest, but with strings attached. If little Thandi has a youth account with FNB she better have a balance of over R100 if she wants to see any interest and even then it’s at a pitiful 0.75%. If Thandi gets lots of pocket money she gets an interest rate of 2.3% on balances over R100, 000. At least this is better than Standard Bank’s Sum1 offering which is 0% – just like last year. Absa, meanwhile, offers a pitiful 0.15% in interest.
Why all the fuss?
This year, Moneybags is calling for an end to rip off bank charges for children. More often than not, kids don’t work for a living so the only way they get to save is through getting or earning pocket money through their parents. It’s hardly fair then for their little nest-eggs to be gobbled up by bank charges, particularly if they (or their parents) can’t get their head around the bank’s rules.
What’s more, overseas banks don’t charge kids when it comes to making transactions. When asked, both UK bank Lloyds TSB and Spanish bank Santander revealed that they don’t charge children to transact. A little bird told me once that children’s transactional accounts are not the core money making machines for South African banks, so why charge them?
As a nation we don’t save enough as it is so why can’t banks incentivise children from an early age to save so that they keep this good habit going in later years? Or do banks perhaps want to prepare our children for the fact that when they reach adulthood they will be charged to transact. It’s a very hard lesson to learn so early on in life if that’s the reality. Perhaps if they got it right early on with kids they could end up with clients for life. A better option, I think.
Banking tips for your children
1. Save on withdrawal fees: If you have to withdraw cash ask your bank about the cheapest method. Check to see if you qualify for free ATM withdrawals. With FNB’s account, for example, you can withdraw cash for free at till points with Pick n Pay and Shoprite with their Cash@Till option. But if you withdraw money at an ATM you pay R3.95 + R1.30 per R100 if your four free withdrawals of the month have been used up.
2. Save on balance enquiries: If you need to check your balance save money by opting for the display function on the ATM rather than printing out a slip as this could cost you. Alternatively find out if your bank allows you to view your account balances online for free. Keep your mini statement checks to a minimum as these are usually more expensive than a simple balance enquiry. For example, Absa’s Mega U charges R2 for every Absa ATM mini statement but checking your balance at an Absa ATM doesn’t cost you anything.
3. If you are saving, consider a savings account or unit trust as an alternative if you want more interest: Transactional accounts typically don’t provide clients with high interest rates and the same goes for children’s transactional banking accounts. Nedbank offers the highest interest rates on balances at 2.65% and FNB’s interest only kicks in on balances over R100 (see table below). Meanwhile, Absa only offers 0.15% interest while Standard Bank’s Sum1 account offers nothing on balances.
4. Save on deposit fees: When depositing money rather transfer the money electronically into the account or use an ATM. As soon as you go into a branch and ask for help from one of the tellers the deposit fee shoots up and it will eat away at your hard earned savings if you do this regularly.
5. Encourage your children to transact online as much as possible: Children generally love technology anyway so encourage them to view their account online or on their phones and transact through these channels. Explain that as soon as ATM’s or branch tellers are involved costs start adding up.
6. When transacting always use your bank’s own ATMs. Tell your children that if they use another bank’s ATM to transact they will pay a lot more than if they were to use their own bank’s ATMs. For example, Absa charges R4.45 to make withdrawals for its Mega U account at Absa ATMs. Use another ATM though or Post Office Terminal, that fee jumps to R7.20 per withdrawal.
7. Teach your children to look after their bank cards: Losing a bank card is not only a security risk but banks charge you to replace that lost card. Both Absa and FNB charge R80 to replace cards.
8. Reset your pin using an ATM: If, for example, you reset your pin at a Standard Bank branch you get charged R3.50, while doing the same thing using an ATM is free.
9. Make sure there are funds in the account: If your child gets declined when they are making a purchase due to insufficient funds, they could get charged. E.g. Standard Bank’s Sum1 account charges R7 per point of sale decline.
10. Don’t use these accounts overseas: Transacting overseas can be expensive so rather switch or transfer money into an account that offers you the best overseas ATM transaction fee charges to suit your needs. With Absa’s Mega U account, for example overseas ATM cash withdrawals will set you back R50 and point of sale purchases will cost you R45.
Source: Absa, FNB, Nedbank and Standard Bank. Correct as at 26 June 2015.
• *FNB Youth Account interest applies as follows: R1-R99 (0%); R100-R999 (0.75%); R1, 000-R99, 999 (R1.25%) and R100, 000 and above an interest rate of 2.30% applies, click here.
• **To save money rather withdraw money at Cash@Till points with Checkers, Shoprite and Pick n Pay for free.