Understanding and optimising bank charges

Banks render a vital service to the community and deserve to be adequately compensated. Howeveraccount holders must be vigilant and prudent to ensure we pay the minimum possible for the best services. How many of us audit our accounts monthly? Do we go through our online statement to ensure only the correct transactions passed through our accounts? We must not only be aware of the fees accruable to our accounts, we must confirm that they are charged in line with agreed terms. Through human error, negligence or even corporate fraud many have paid fees over and above what they were liable to pay.

It is important to note though, that not all bank charges are actually earned by the banks. In some cases, they collect the money on behalf of those who render support to them e.g. Telecom and Switching Companies; in some other cases they collect on behalf of Government Agencies e.g. NIPOST and FIRS.

The most common fees are the ATM Fees. Central Bank authorizes a fee of N65 each on every withdrawal afterthe 3rd transaction done on another bank’s ATM in one month. This fee is shared between the switching company (e.g. Visa or Interswitch) and the two banks involved in the transaction.If you only withdraw from your own bank throughout one month, or you draw from another bank three times or less, you would not be charged this fee. Therefore, we must be wise in our withdrawals so as not too encounter this fee at all.

The SMS Alert Fee is payment for the SMS you receive for every transaction on your account. It is N4 – the price for SMS in Nigeria and it goes directly to the Telecoms Company. The only way to opt out of it is to choose email alerts. Most of us have email services on our phones and we receive emails free of charge, so that may be an option worth exploring.

Stamp Duty of N50 is payable on every deposit into a Current Account. The banks collects this on behalf of NIPOST and remits it to them in full. The only way to avoid this charge is to use only a Savings Account but there are limitations to the uses of a Savings Account.

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When we use some POS machines, we could be charged a fee the convenience – 0.25% of the value of the transaction; with a maximum fee of N1,200 per transaction. This fee like the ATM Fee is shared between the 2 banks involved (yours and the Merchant’s), the switching company and sometimes the merchant. This fee is becoming less common – confirm from the merchant if their POS still charges this fee. Internet/ Mobile banking fee is charged on transactions done via the internet or mobile phone. After effecting a transfer, many of us get an additional SMS for a fee of N52.50 in addition to the transaction alert. The N50 goes to the bank, whilst the N2.50 goes to FIRS as Value Added Tax (all bank charges attract five per cent VAT). The key to reducing this fee is to consolidate transactions as much as possible, before making a transfer.

Account Maintenance Fee is charged at N1 for every N1,000 withdrawn from a current account. This is accumulated and debited into your account on the last day of the month. Some banks have special accounts that are cost free; however these also come with conditions regarding minimum/maximum balance, number of withdrawals permitted per month, eligible banking services etc. We must review these concessions and ensure they fit our peculiar conditions before opening such special accounts.

Ten per cent Withholding Tax of is charged on Interest earned from Savings/Fixed Deposit Accounts with average balances in excess of N50,000 throughout the month. This is remitted in full to FIRS.

Borrowers encounter interest, loan management fee etc. Always negotiate these before accepting. Negotiation has the potential to reduce our charges,so we owe it to ourselves to explore the possibility. Let’s review our statements monthly. Interest is computed daily (though charged at month-end) on each day’s closing balance – we too can calculate the interest deducted to confirm that we are not overcharged.

Banking fees are small individual sums, but they accrue if not properly managed. Let’s ensure we manage our bank charges optimally.