Bank Charges – Who Has the Best Deal?

Mirror, mirror on the wall what is the fairest bank of them all? The numbers are deceptive!

Banks, in their pursuit of customers, continue to employ the carrot and stick approach, dangling a few baits in the form of cheaper fees to lure customers into banking halls, and then going for the kill using higher charges on other platforms, a review from the latest figures released by Bank of Uganda shows.

This approach appears to be employed by almost every bank, a departure from the traditional way of banking, where newer banks are expected to offer better terms to ramp up their customer numbers. Although, to be fair, a new bank such as Bank of India is trying so hard to attract some clients.

The bank, for example, has one of the best offers on its fixed deposit account as it gives out a minimum of 10 per cent and a maximum of 13.1 per cent, the most lucrative spread within the industry, and it also has the cheapest charge of Shs 5,500 on its Real Time Gross Settlement.

On the whole, however, both the new and older banks appear to be engaged in a game of cat and mouse for Uganda’s limited number of customers, using sugarcoated incentives to charm their way into the clients’ hearts.

The difference the bank charges makes it hard for investors to predict the average market rate, with the spread in variances so wide it almost looks a game of survival-for-the-fittest in a black market.

For example, where Bank of Baroda charges Shs 500 on a leaf of a cheque book, Stanbic bank’s figure is more than double, at Shs 1,200. Activating a dormant account at Barclays bank will not cost you any money, but you will pay Shs 50,000 at Crane bank. These kinds of variances are spread throughout the different service platforms.

It is for this reason that customers are likely to find it hard to choose their bank of choice among the 24 banks whose charges the central bank released recently. A review by The Observer shows that for a starter, who simply wants to own a bank account, Equity bank appears the best choice as it is the only bank where it is free of charge to open up a savings account. There are also no fees for one to open up a current account at Equity bank.

The numbers do not tell the entire story, and nowhere does the carrot and stick approach come into play such as the much-watched prime lending rate. According to the figures, Equity bank appears to be the bank with the cheapest interest rate on its loans, at 19.5 per cent, only losing out to Bank of Baroda, at 19 per cent.

Crane bank, on the other hand, appears to be the bank with the highest lending rate in the market of 24 per cent. However, that is on the face of it. The tables between Equity bank and Crane bank are turned when one considers those underhand fees that loan applicants hardly pay any attention to.

If you consider those loan-related charges, then Crane bank might have a better loan package than Equity bank. Crane bank, unlike its peers, has the fewest loan-related charges. Equity bank charges three per cent to four per cent of the total loan amount as an application fee, and yet other banks such as Crane, Standard Chartered, dfcu, and Stanbic do not have that charge.

Equity also slaps a two per cent insurance charge on its loan applications and yet banks such as Crane do not have that charge. Equity also has a charge of two per cent of the total amount for a loan facility renewal, and yet Crane bank does not make any charges on that.

Equity bank shows little mercy for those who wish to open up a fixed deposit account. The bank’s minimum balance on its fixed deposit is a whopping Shs 5m, with banks such as Finance Trust at Shs 100,000.

The fixed deposit account is perhaps the best option for customers to make money off banks. And yet, from the numbers released, one would expect that a bank that charges the highest minimum balance on the fixed deposit ought to be the one that offers the best reward on that particular account. In Uganda, that is not the case.

Standard Chartered bank requires the second highest amount for one to open a fixed deposit account – Shs 10m. And yet, it offers a maximum interest of 11.5 per cent. Bank of Uganda says its intention of publishing these rates is “to promote transparency and enhance competition in the provision of banking services.”

Cairo bank, on the other hand, offers the best rate on the fixed deposit, although, just like Equity, one requires to have an opening balance of Shs 5m to enjoy that benefit. Cairo offers a rate of 14.5 per cent. Barclays, which says the interest it offers on its fixed deposit account is variable, has the most expensive account opening an account will require you to have Shs 15m short.

At a certain point, the banks almost have similar charges, although that is on platforms such as paying tax and school fees. The charges vary between Shs 2,000 and Shs 2,500.

Also, most of the banks do not charge customers who need their statements, although some like Bank of Africa will require you to fork out Shs 3,500.

And yet, the fees cannot be the best benchmarks for one to choose a bank. Oftentimes, customers move to a bank which has a wider ATM network. Customers, for example, are willing to stick to Stanbic bank, which has the most number of ATMs at more than 140 spread throughout the country, despite its charges.

It might not be such a wise choice to have an account at Equity bank, where the ATM network is still low although the option of using VISA exists.

While online banking is gradually growing, it is still a long way before customers snub banking halls for the convenience of transacting over their computers or phones. As such, banks with the most number of branches still attract more customers. The numbers are usually considered later.

Source : The Observer

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