I made the move from Investec to Capitec in March of this year and this saved me a significant amount of money. You can read more about that in my March finance update. Before making the switch I did a lot of research to find the cheapest bank account because moving banks is a crapload of work and I won’t do it again. Since I already did the research I figured I should post it so everyone can make an informed decision.
Just like Exchange Traded Funds (ETFs) are having a race to the bottom with regards to fees, the banks are also playing this game. Every now an then you hear that a bank has shaved off one rand here and fifty cents there in the hope of attracting new clients (or keeping existing clients).
To be honest, paying one rand less to bank, won’t make me switch banks. I also know that the bank charging one rand less will constantly change as the fees vary. I just wanted a bank that had stable finances, a decently priced account and if they offered a bit of interest on this account it would be a bonus.
What will it cost?
The first thing that I did was to determine what the typical South African will do with their bank account during the month. I assumed that you would need to do three Electronic Fund Transfers (EFTs), two debit orders, a deposit and withdrawals from your bank, another bank and a Point of Sale (POS). This might be slightly more than the average South African withdraws, but I want to include all three for a proper comparison. Also, I’m not going to include swipes as these are free on the packages. Let’s start with the big 5 banks.
| Capitec | FNB | Absa | Nedbank | Standard Bank | |
| Account fees | R5 | R4.95 | R4.9 | R0 | R4.95 |
| Deposit | R5 | R4.75 | R12 | R5 | R8.25 |
| EFT | R1 | R3.75 | R2.5 | R2.2 | R1.5 |
| Debit order | R3.5 | R3.75 | R3.8 | R5.5 | R5.5 |
| Withdrawal (Own) | R6 | R9.5 | R6.5 | R7 | R9.25 |
| Withdrawal (Other) | R8 | R18.5 | R18 | R18 | R18.25 |
| Withdrawal (POS) | R1 | R1.6 | R1.6 | R2 | R1.4 |
| Monthly average | R35 | R58.05 | R58.1 | R49.6 | R57.6 |
Analysis
From the above figures, Capitec has the cheapest bank account at just R35 per month. Their offering is made even more attractive by the fact that their transactional account earns interest (technically a savings account). The average salary earning South African earns R21 190 per month, so after saving a few rands and then systematically using the rest of the money during the month, I assume the average amount in the account will be around R5 000. At 4.75%, that means interest of about R20. So your effective cost is even lower at R15.
Then the cherry on top (for me personally) is that their instant payments are R8, five times cheaper than the closest competitor. I checked and I did four instant payments in the last year and it is, therefore, something I must consider. Their fixed deposit savings rate is also respectable. So, they are an all-round good option. You can find the links to the account costs here (Capitec, FNB, Absa, Nedbank and Standard Bank)
Other cheap options
There are a few other low-cost offerings as well which definitely deserve a mention. The costs of these can be seen below.
| Tyme Bank | Bidvest | Old Mutual | African Bank | |
| Account fees | R0 | R6 | R4.95 | R0 |
| R500 deposit | R4 | R4 | R5 | R10 |
| EFT | R2 | R7 | R1 | R0 |
| Debit order | R2 | R5 | R2 | R4 |
| Withdrawal (Own) | R2 | R6 | R7 | R6 |
| Withdrawal (Other) | R8 | R13 | R10 | R6 |
| Withdrawal (POS) | R2 | R5 | R1 | R2 |
| Monthly average | R26 | R65 | R34.95 | R32 |
Tyme bank is the most affordable. Especially since the account will cost you nothing if you do not make any transactions during the month. Tyme Bank also has arguably the best savings interest rates and can be accessed anytime.
The account from Bidvest is not as affordable as the other options but the Old Mutual account really surprised me. When I made the switch, I did not consider them. Probably because their unit trusts and retirement annuities are ridiculously expensive.
African Bank also has excellent account fees and like Capitec offers interest on positive balances. The 5.5 % interest will earn you R22.92 on an average balance of R5 000. This leaves you at an effective cost of R9.08. The other accounts do not offer interest, but the fees are extremely affordable. You can have a look at the fees here (Tyme Bank, Bidvest, Old Mutual and African Bank).
Cheapest bank account
If you are looking for the cheapest bank account in South Africa, then you should look at either Capitec, African Bank, Tyme Bank or Old Mutual. Depending on what your transactions are, the cheapest bank account might be different for you. However, if you are willing to spend R30 more per month, you can go with any of the abovementioned options.
Rewards programs will also change the amount you effectively spend on banking, but that’s a topic for another day. You need to determine whether you really need all the bells and whistles offered by the more expensive packages from these banks. For me, it did not make sense.
Be safe out there,
Hendrik
Quote of the week
“It’s tax time. I know this because I’m staring at documents that make no sense to me, no matter how many beers I drink” – Dave Barry Click To TweetEndnote
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Comments
Awesome information
Author
Thank you Jeffrey.
Thank you. Worthwhile info on bank fees.
Can make a significant difference over a long period of time.
Author
Definitely, if you saved R200 every month for a few years it will add to a massive total. Especially if invested.
Thanks for reading.
Hi Hendrik
Thanks for this analysis.
Quick question re move from Investec to Capitec/other bank for that matter:
If you have a home loan, is that currently with Investec?
Think somewhere in their home loan docs it states there is an additional monthly/annual/once-off admin charge (? – must go and dust off my Investec docs and look this up) if you have your mortgage with them but dont bank with them.
If this is true, did you consider this monthly (if it is monthly?) charge in your analysis above if you decide to keep your home loan with Investec but switch to Capitec?
(Knowing that Investec offers up to prime minus 1 is most cases, I assume you would want to keep your home loan with them.)
I’m also considering making the move. Still under 30, so still paying the ‘reduced’ fees but time is running out and then it’s the big league bank charges which I want to avoid!
Thanks
Author
Hi Ghk,
I was in the exact same position, so I can give you my figures. With Investec, I paid R535 and had no monthly admin fee on the home loan (prime minus 0.65%). When I moved, Investec started charging me an admin fee of R60 and my bank charges with Capitec averages R31. This month my interest on the account worked out to R95. So after making the switch, I pay -R4 effectively. That is a swing of R539. Well worth the effort.
Thank you for reading.
Great article. Would’ve loved to have seen a mention of African Bank as they offer the best interest rate of 5.5% on their transactional account and just like TymeBank, they have no monthly fees.
Author
Khulekani,
I am planning on updating the article and I will include African Bank for you.
Great Blog Hendrik.
Would investec still provide a mortgage bond to clients that dont already have a current account with them. Their interest rates are generally better than other banks.
I currently have a mortgage bond and current account from investec. My only concern with moving bank account to Capitec was that if a wanted to move house at a later stage and it would be difficult to get a mortgage bond with Investec? Or investec would potentially only offer a worse off interest rate? i’m not sure if that is worth not changing though.
Author
Thank you so much CN,
Like I mentioned, I did manage to keep my existing loan without the interest rate changing. I assume that you would be able to still get a loan there without an account, but even if you can’t, there are numerous other options where you can apply. Do you specifically want the next loan to be with Investec?
Agree with your response. Investec did seem much more reasonable at the time of getting the bond originally (ie their interest rate is very competitive). However I’m not sure that would be the case in the future. Also not worth paying fees now on the assumption I might need them in the future.
Great, thanks for this. I’m still on the R295 monthly fee which should increase once I hit 30.
I’ll go check whether my home loan docs also state the 60 bucks. And do the numbers to see where I end.
Out of interest, referring to another blog post of yours how to save, asking bank for a lower interest rate on mortgage, did Investec ever give you a reduction?
Author
Only a pleasure. I can ask for a review of the interest rate in September. Will keep you updated.
Hi Hendrik.
I do most of my transactions via internet banking.
I’m currently at Standard Bank and their fees are not great.
What are your recommendations?
Author
Hey Shihaam,
The easiest option would be to switch to Standard Bank’s pay-as-you-use account as mentioned above, which I suspect will already save you some money. If you really want the absolute cheapest option, I really like Capitec. Yes, it will be a bitch to move, but it is worth the effort.
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Hi Hendrik
Thank you for the information, I am with African Bank and I am loving it. Close to Zero Bank Fees, No monthly fee. Thank you
Author
Hey Weaver, I’m really glad to hear you are enjoying their services. It is extremely well-priced.
Hi, Mr Brand. I just came across your website on Google, and I must say it’s super informative.
One question though – how do fixed deposits actually work in South Africa? Please include examples if you can. I am considering Capitec’s fixed deposits. Also, please include the taxation aspect i.e. do I pay from the payout on my own by let Sars know about it or does the bank take it and then pays it on my behalf? My income bracket is in the 10k per month range.
I would like to invest 10k for 12 month’s but I was thinking of starting with 3k for 3 to 6 months to see how it worked in practice.
Thank you.
Author
Hey Gult,
If you invested R100 000 for 2 years in a fixed deposit at 10%, you will have R110 000 at the end of year one and then R121 000 at the end of year two. At this stage you can access the funds without paying a penalty.
In year one you earned interest of R10 000 that you need to declare to SARS and in year two you earned R11 000 that you also need to declare. This is added to your taxable income and you pay tax on it. You do however get a tax exemption on the first R23 800, so in this example, you will not be paying any tax.
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