How to find a good value bank account

Opening a bank account is seen as a necessity, but is rarely given serious thought, as the decision is usually taken when one is younger and financially inexperienced.

Justmoney spoke to industry experts to find out how you can identify a good value bank account.

What should I find out before I open a bank account?

Nitesh Patel, head of customer financial solutions and personal banking at Standard Bank, highlights: “Before opening a bank account, shop around by visiting different banks.”

According to Patel, it is important that you ask the following questions:

·         Do they have the account that suits your needs?
·         What are the charges on different accounts?
·         What is the interest you earn on the chosen account?
·         What is the service offering behind the value proposition?
·         Are your rights explained upfront?
·         What are the requirements?

“How you use your money is directly linked to the bank account you should have. If you hardly use your account a ‘pay as you go’ account with low monthly fees, but with charges for each transaction, may be suitable.

However, if you transact regularly, you could look for an account where you do not pay per transaction but a monthly fee. This allows you to budget for your banking costs on a monthly basis.  By choosing the right account, investigating what you get with this account (including its rewards), and banking smartly, you may surprise yourself and end up saving,” says head of consumer education at First National Bank (FNB), Eunice Sibiya.

It is vital that you not only compare banks and understand what is on offer, but that you compare different account types in accordance to your spending habits and financial etiquette. There are two basic account types that one can select between, savings or cheque, each catering to different financial habits.

What is the difference between a savings and a cheque account?

“A savings or an investment account is intended to build a cash reserve over time for specific goals.  You should want to preserve these funds in a separate account and see it grow over time.

A cheque account is used for receiving regular funds such as your salary and for managing your daily transactions/spending activities, like bill payments, debit orders, [and other transactions],” explains Patel.

What are the benefits of a savings account?

A savings account enables you to save money for a specific goal or for emergencies. You can put money into the account regularly, but you don’t want to necessarily access the funds regularly as that defeats the purpose of savings.

“A savings account should offer you good interest rates, depending on the amount you save.  The less access you have to your savings, the higher the interest rate would be. You would not want to run debit orders off your savings account as you tend to lose track of saving for your goals,” says Patel.

He continues to say, “If you are saving for emergencies, you would want a savings account that gives you easy access to your funds when you require them with minimal penalty fees. However, the rate of interest will be lower because the funds you are saving are effectively ‘on demand’.”
 
What are the benefits of a cheque account?

“You can use your card as a debit card. Purchases and cash withdrawals are taken off your cheque account,” indicates Patel.
 
At an ATM your card lets you do the following:
 
1)      Withdraw cash
2)      Make deposits
3)      Make account payments
4)      Request mini statements
5)      Make balance enquiries
6)      Do inter-account transfers
7)      Prepaid top-ups
 
When you use your cheque card at an ATM, the cash withdrawal and electronic account payment limits set by you apply.

Patel points out that with a cheque account the following is available:

o   You receive monthly statements on your cheque account. 
o   You can apply for an overdraft on your cheque account.
o   You can run debit orders against your cheque account.
 
“It's something that offers you functionality and flexibility. Something that helps you manage your money in a way that works for you. Various accounts have different benefits including rewards, low transactional costs and the like,” reveals Patel.

What should I find out before I switch bank accounts?

Banking has become less about banking fees and more about value adds that come with your account. Before switching bank accounts check to see what electronic or digital services your bank account allows you access to, know why you are switching, and ask yourself if it’s necessary and for the right reasons.

Patel further advises that you would then need to notify your bank within ten business days of changing and ask them to provide you with the following information:

·         Up to three months’ statements;
·         A list of stop orders loaded on your account;
·         A list of beneficiaries loaded on your account; and
·         Any supplementary or linked cards or accounts that may be affected by the switch.
 
“Once all the information has been obtained, you would then instruct your bank to close the account.

It is advisable, however, to keep the old account for at least six weeks after you have switched, so that all transactions can be identified and switched.  Try to also keep some funds in the old account to cover any transactions that are not switched in the six weeks,” states Patel.

What are the requirements for opening a bank account?

According to Patel, anyone can qualify, both South Africans and foreign nationals. You do not have to have a regular income or even a job to open an account, but one cannot be opened for you unless all required information and documents have been supplied.

Documents South Africans need to provide are:

1)      An identification document.
2)      Your most recent salary slip or proof of income (should you wish to apply for a cheque account with an overdraft).
3)      Proof of residence, such as a utility bill, telephone account or letter from your employer.
4)      Birth certificate (only for minors younger than 18 years).
5)      A minor residing at the parent or guardian's residential address, can provide a utility bill, telephone account, bank statement or letter from the parent’s or guardian’s employer etc. reflecting their parent or guardian's name and residential address, together with a letter confirming that the minor resides with them.
 
FICA documents foreign nationals need to provide are:

 1)   A formal identification document such as a valid passport.
2)    A valid work permit. 
 
“The process of opening a bank account is quick and easy. You can find all the information you require online and can even apply for an account online.  You can also contact the relevant customer contact centre or go to your nearest bank branch and speak to a branch consultant,” adds Patel.

Absa and Nedbank were unable to provide comment in time for publication.