credit card options in South Africa
credit card options in South Africa
28 Jun 2008. In August 2006 the Banking Enquiry was established to study various aspects of retail banking in South Africa. Nearly two years later in June 2008, the Banking Enquiry panel have published their findings for the Competition Commission.
Several fees were listed as being "unacceptably high":
off-us ATM transactions
cash deposits
penalty fees (especially rejected debit orders)
In accounts held by the lower income groups, debit orders are more often rejected because of lack of funds. For these clients indications are that the banks make more money from rejected debit orders than for successful debit orders. Banks charge the penalty fee per rejected debit order item. The commission found it unacceptable that banks should charge more than the cost of processing the rejected debit order item, and recommended that rejected debit order fees be capped at R5 per item.
Charge for a rejected debit order |
|
Capitec Bank |
R3.50 |
Nedbank Mzansi |
R10 |
Absa Mzansi |
R30 |
FNB (First National Bank) |
R30 |
Standard Bank Eplan |
R31.50 |
Nedbank Cheque Account |
R75 |
Absa Platinum |
R100 |
FNB Encore Cheque Account |
R105 |
Standard Bank Elite & Prestige cheque accounts |
R105 |
has indicated that it currently charges R30 for a rejected debit order item, whilst Capitec Bank charges R3.50.
A submission highlighted in the report was that there is one bank branch in Alexandria servicing 175 thousand people, and 59 bank branches in neighbouring Sandton servicing 130 thousand people.
Interbank fees for credit cards cover costs like the interest-free period for the customer, which is enjoyed by customers who pay their entire amount outstanding each month. Retailers effectively load their prices for all goods to pay these interbank fees, even though the benefit is only enjoyed by those who take advantage of the interest-free period. Pick 'n Pay feel that the interbank fees should only cover processing costs.
The commission wanted to check if there was any relationship between bank fees and their costs, but couldn't do so with the information submitted (costs are just one of the inputs by the banks into their pricing models). Banks also seem reluctant to be vigorously competitive with each other, as this would "spoil" the market for themselves. The commission concluded that the fees being charged are probably well above the level they would be charged in a competitive market.
"Off-us" ATM transactions occur when the customer of a bank uses another bank's ATM to process transactions. Customers are charged much higher fees for "off-us" ATM transactions, and much of this fee is retained by the issuing bank. The fee that is paid by the issuing bank to an ATM service provider is known as the "carriage fee" (and this is multilaterally agreed on by the banks). If the carriage fee is abolished and replaced by a direct fee by the ATM service provider, there may be more price competition. So the ATM service provider would then recover fees from the customer rather than from the issuing bank.
The Black Sash and Financial Sector Charter Coalition felt that those receiving grants and low income workers should receive free banking.
Costs of becoming part of the banking payment system include:
costs of hiring people to operate the payments systems
Transaction fees
costs of IT systems,
fees to Mastercard / VISA for credit cards & debit cards.
costs of point of ATMs,
fees for Bankserv, the Payments Association of South Africa, the South African Reserve Bank’s settlement system
Read on and you'll understand by Capitec Bank feels that as “a small player, you have got very little, if any, negotiating ability”. In the "technical phase", prospective new entrants have to gain permission from each of the existing members. After the technical phase follows the "negotiation phase", where new entrants must negotiate interbank fees with each incumbent.
Capitec Bank and Mercantile Bank have expressed a preference for a system of multilateral setting of interbank fees.
Individuals made some two hundred and sixty seven submissions to the banking enquiry, and there were also submissions from a range of consumer groups, including:
the 1860 Pioneers Foundation
the Bank Pensioners Society,
the Benchmark Foundation,
the Black Sash,
the Ethekwini Civic Forum,
the Financial Sector Charter Coalition (which included the Cosatu trade union and the South African Communist Pary),
the Savings and Credit Co-operatives League,
and the South African National Consumer Union.
