Operating a bank account makes one feel secure in the knowledge that their money is safe and easily accessible whenever they need it.
However, with these conveniences, many other expenses to the account holder are overlooked as long as they have access to the bank account and their money.
While banks make it seem like they are doing account holders a favour by keeping their money, on the contrary, the institutions keep getting rich from your money through the access you have given them.
If you have never sat down to do the math, then you could be the kind that loses money through avoidable transactional costs or you don’t care much for the savings you could make.
Just like with mobile money, operating a bank account comes at a cost which is borne by the account holder and not the bank. Cumulative costs over time could make a difference to your finances since in Kenya, bank accounts are not given for free.
According to FSD Kenya, the annual average cost of running a bank account is KShs 4,419. This cost includes making withdrawals, deposits, transfers and paying for account maintenance (ledger fees, balance enquiries, etc.) is diverse across banks, averaging KShs 4,419 and ranging from KShs 845 to KShs 17,750 annually.
“Accounts that charge a monthly ledger fee have higher annual costs. However, the line between pay-as-you-go accounts and flat-fee accounts is blurred as some pay-as-you-go accounts charge a monthly ledger fee. Likewise, some flat fee accounts also charge per-transaction fees such as withdrawal and transfer fees. Bank customers on average spend KShs 3,944 on withdrawal charges, KShs 4,485 on bank transfers and KShs 1,007 on account maintenance fees annually.”
The report, Cost of Banking, 2018, shows that digital channels offer significant cost savings to customers. For instance, a bank customer who transacts digitally saves an average of KShs 9,350 in annual transaction costs. A customer who prefers to transact at the branch will incur an average of KShs14,970 in annual transaction costs compared to KShs 5,620 if transacting digitally.
Interestingly, a lot of costs are stacked on digital transactions such as the cost of an SMS receipt which the report indicates were as high as KShs 28 for one bank.
“In addition, some transactions such as balance enquiries and deposits that are free over-the-counter are charged by some banks when done digitally,” notes the report.
The report notes that while banks are making an effort to treat their customers better, there are still gaps in price transparency and suitability of advice.
“Compared to 2017, we observed an improvement in the way that banks relate to their customers. Closing an account, a process that could take several days and that was a barrier to switching, now takes between 10-30 minutes,” adds the report.
Still, some banks were pushing accounts which did not suit the customer’s needs.
“We observed a tendency for some banks to push certain accounts that were not suited to the customer’s needs. Two banks opened a business account for a customer who asked for a personal account. Third-party costs related to digital transactions are not disclosed all the times.”
The report also notes that there were instances of unexplained debits from the customers’ accounts but the problem was not pervasive across all the banks.