African Bank's transactional service fees

This is a review of African Bank's transactional platform, not so much their investment platform. If I had to review their investment offerings I would have probably given a higher review, perhaps a 4.5 out of 5.

So first the good stuff. This bank being relatively new among the major banks of South Africa seems to be very proactive in providing genuine value by way of investment products which actually give back without taking back what they give by way of high service fees, or by not giving decent returns, as with other banks. This is why I have to take my hat off for African Bank's investment offerings.

The bank however does not fair that well with their transactional platform, the "My World" and their "Pocket" offerings, in my humble opinion. It appears in fact that they try to take back here what they give to the customer through their very attractive investment returns.

Let me explain.

Technically, African Bank can actually own up to 2.75 percent of funds you deposit into your transactional and pocket accounts, depending on the channel you use to transact. They do this by charging you up to 2.75 percent of all your funds as service fees, but without applying a sealing limit to their deposit fee. The implication of this seemingly minor detail is far more serious than the average consumer realizes, and the bank thrives on that ignorance. If customers realized this fact, they would be up in arms. This fact, the non-adherence to a sealing limit to the deposit fee, is not known by the average consumer of their products, unless they carefully study the fees structure.

I will now explain this, first by quoting directly from their price guide, and then by demonstrating the implication of that pricing policy. Ready? Here goes.

Let's use the Pay@ Debit card deposit channel which attracts their highest price of 2.75% of your deposit. Their price guide lists this as follows:

QUOTE:

Pay@ debit card deposits** 2.75% of transaction (Main Account); 2.75% of transaction (Power Pocket); 2.75% of transaction (Savings Account ).

UNQUOTE

Notice as I mentioned, none of these include a maximum sealing limit, so let's see how this seemingly minor omission has a far more serious implication than most of us realize.

Let's say you have a large sum of money to deposit into your debit card: 100,000 Rands. Well, in that case, your service fee alone will be a wopping 2,750 Rands! Let's say you are depositing 1 million Rands. Your service fee alone will be 27,500 Rands! This is for a single deposit transaction fee! Can you now appreciate that African Bank has no limit of how much they can charge you for service fees? This is how severe the matter is, when I say they don't have sealing limits to their service fees.

Let's now assume they did have a sealing limit to their deposit fees. The wording in their price guide should then state something like this:

QUOTE:

Pay@ debit card deposits** 2.75% of transaction up to R800 (Main Account); 2.75% of transaction up to R800 (Power Pocket); 2.75% of transaction up to R800 (Savings Account ).

UNQUOTE

Now, let's say you deposited R10,000. Your service fee would be R275. Fair enough. The sealing limit won't apply because your fees have not reached that limit. The bank still makes their reasonable income from your money. Now let's say you deposited R50,000. If the sealing limits do not apply (as it currently stands), you will be paying a fee of R1,375. However, if there is a sealing limit app**** to their fees (as it should be within fair and good reason), the service fee will now be limited to R800. Same thing in our extreme examples above with R100,000 Rands, or even 1,000,000 Rands. With a sealing limit app****, the bank will charge the maximum of R800 for those fees. They could then earn by investing customer money and earning their living from the returns, since most consumers will choose to put large sums into investment options that the bank can in turn earn from.

Now I'll offer you a good tip for depositing funds with African Bank:

The best option for depositing cash as of the time of this writing and their present price guide in my experience is as follows: African bank states in their current price guide: QUOTE:

Pay@ cash deposits** R5.00 for first R1000 then 1.75% of value R1000 is exceeded by."

UNQUOTE

Let's explain that clearly. It means that if you deposit R1,000 or less, whatever the amount, you will pay R5 for that transaction. So, if you deposit R1, you will pay R5 service fee! If you pay R5, you will pay the whole R5 back as service fee. If you pay R1,000, you will still pay R5 as service fee. Got it? However, any amount over R1000 that you are depositing will be charged differently. For that additional amount, you will pay 1.75% of the whole amount after R1,000 as fees. So, if you deposit R3000, you will pay R5 for the first 1,000, and R35 for the remaining 2,000 because R35 is 1.75% of 2,000. Your total fee will be R40.

But here's the trick I want to share with you.

If you be nice to the Pay@ shop teller, buy them a cold drink or something for their time, they might agree to help you by doing multiple transactions of R1,000 for you. This means your fees will be far cheaper. Remember that R5 is only 0.5% of 1000. So doing it this way means that you will pay only half a percent for the combinations of all your transactions. And yes, it's perfectly legal, unless African bank decides to destroy this option by adjusting their service fees structure against it in the future.

So in the example of our R3,000 that we wanted to deposit earlier, instead of paying the R40 as service fees (which I described earlier), if you make 3 deposits of R1000, then you will only pay R5 for each transaction, so your total fees = R15. This will evade the 1.75% of the amount of your intended single transaction which was supposed to exceed R1,000.

One final note. Before publishing this review, I contacted the support desk of the bank and proposed my request of applying a sealing limit to their fees, as other banks do. I was contacted by an agent telephonically with the unfortunate feedback that the bank cannot consider my request. I am hoping that this review might reach an influencial representative at African Bank, who might consider this proposal as reasonable and decide to implement it. Perhaps other customers may wish to chime in with this proposal, improving the likelihood of it being noticed.

I hope this helps everyone out there. Money is tight, and if I can help some of you save, perhaps God will bless me to survive financially also in this difficult world. As a side note, I was retrenched from FNB, having worked there for 10 years, because they don't want people with disabilities in their workforce. I am totally blind in both eyes. All the blind switchboard operators at branches throughout the country working for FNB were targeted and retrenched in May of 2019. We cried and pleeded during the retrenchment hearings, but they never stopped to ask "How can we help you". It's a cruel world. God bless everyone. If you wish to get in touch with me regarding my review, please write me by E-mail. ykhandoo followed by the @ sign, followed by webmail.co.za. Now put that together using human intelligence so that spam robots don't pick up the address and start sending me garbage E-Mail.

Kind regards,

Yogan