In many countries, the banker-customer relationship has reached a point where due to technological advances and a deepening competitive environment ‘the mountain (bank) must now come to Mohamed (customer).’ In local banking halls however, it appears that the mountains are generally not yet ready for this new dynamic and poor Mohamed still has the unenviable task of climbing very some high mountains.
In banking there are some popular catch phrases like KYC (Know Your Customer) and even KYCC (Know Your Customer’s Customer) but what is rarely discussed is the other side of the equation, what I would call KYB (Know Your Bank). If prospective account holders took some time to get to know their options better, there might be less financial heartbreak further down the line. One of the key objectives of this column is to engage with readers in a way that enables them to get financial savvy in order to become more informed consumers of financial services. With this in mind, I bring you the first in a two-part series which considers the variables one should take into account when choosing a bank.
Interest Rates: Is the account interest bearing and if so what is the current interest rate and how often is the interest earned credited to the account? Most banks will pay interest on a monthly basis while others, depending on the type of account might calculate interest on a monthly basis but credit it to the account at some other predetermined interval such as quarterly.
Minimum deposit and withdrawal amounts: How much must be deposited and maintained in the account to open it and keep it open?
Limitations: What limitations are imposed on the account? Perhaps the holder is entitled to a limited number of transactions per month, or the withdrawal limit is set quite low. Different banks have different control measures in place to manage risk and some of these can be very bureaucratic, so be sure that you understand them before you take the plunge.
Accessibility of funds: How soon after depositing the funds are you able to make withdrawals against them?
Deposit Protection Insurance: Enquire about the extent of the protection available to you in terms of deposit protection insurance. The Deposit Protection Corporation was set up to protect depositors in commercial banks and other institutions licensed to operate banking business in Zimbabwe against the worst consequences of bank failure. It offers limited coverage and guarantees that small depositors will be paid in full up to the insured amount (maximum insurable limit – currently $500 per depositor) in the event of bank failure.
Bank Size: Some people feel more secure dealing with the biggest banks because of their larger balance sheets and branch networks. Others however believe that the quality of service is inversely proportional to the size of the bank – the bigger the institution, the more lethargic and inefficient it is. On the contrary, smaller banks can be more nimble-footed and therefore more responsive to customers’ needs.
Convenience: An extensive branch, ATM and Point of Sale (POS) network will usually translate to convenience, as there is likely to be a branch, an ATM or a POS terminal in your vicinity, wherever you are. What are the bank’s opening times? Does it offer extended banking hours? What online facilities are there?
These are all questions worth asking of banks before you make a decision as to who will be keeping your money for you. Proper research will ensure that you aren’t caught out down the line by hidden costs or problematic small print.