Business Daily (Nairobi)
James Ratemo
22 December 2011
The festive season is here with again and the spending spree is already in full gear.
To survive , prudence is required and that’s is why today I want to talk about why you should be wary as you use automated teller machines (ATM) to access your money. The little card comes with a lot of convenience but can turn out to be costly as well.
First and foremost, despite the easy accessibility of cash through the ATM, budgeting is needed to guard against avoidable charges.
If you are earning a regular income, then you should set aside a savings account that you cannot access easily using your ATM card in order to curb spontaneous and impulse withdrawals, just because cash is just a buttons away.
Huge costs
An ATM is likely to lead to reckless spending especially if your savings are piled in an account that you can access easily. Unfortunately, for some people, the ATM card never leaves their wallet or hand bag even when they are having a stroll to the nearby trading centre. Meaning, they are always ready to spend money using the card.
ATM card holders also incur huge costs if they pay for goods and services using the cards without keeping a close watch on the amount spent. ATMs have made life easier because cardholders no longer have to endure the long queues that were the norm before the innovation burst into the local scene.
The scenario turned even more exciting with the introduction of the Visa network, that allows account holders to withdraw cash at any ATM hooked to their banker’s network across the country and to make purchases using the plastic cardsToday it is even possible to deposit cash via the ATM or even do an MPESA transaction through the wonder machines. Even those outside the country can transact with the cards as long as their accounts have money and their banks are hooked to global networks like Visa.
Quick survey
But beware, the convenience of cash withdrawals using ATM comes with a price. Many banks offering ATM services charge between Sh20 and Sh40 for each withdrawal. However, when a customer withdraws cash from another bank’s ATM, the fee ranges between Sh150 and Sh250.
A quick survey reveals that Kenya Commercial Bank charges a flat rate of Sh20 for withdrawals on the its ATMs. Barclays Bank charges Sh30 if a cash withdrawal is made from its ATMs but Sh200 from another bank’s ATM.
At Stanbic, customers are charged Sh250 when they withdraw from another bank’s ATM if it is on the Visa Electron network but Sh30 when the same transaction is effected through its cash machines.
At NIC Bank, if you are an account holder, withdrawing from the bank’s ATMs is free but you are charged Sh750 per month to maintain the account.
Apparently banks pay Visa for the service, which enables their networks to be compatible and the cost is then passed on to the customer.
Owning an ATM card maybe convenient but be wary of the costs involved in making withdrawals because the charges involved may drain your savings.
Sample this: if you withdraw cash through another bank’s ATM, at Sh250 per withdrawal, you may end up spending Sh1,000 for a minimum of four withdrawals per month. This cost adds up to Sh12,000 per year on withdrawals only. Not a small amount by any standard!
The same number of transactions through the customer’s bank ATM network could cost about Sh150 per month or Sh1,800 annually. Making withdrawals over the counter can cost anything between Sh100 and Sh500 depending on the bank.
Mwamba James who operates an account with Kenya Commercial Bank, says he is charged Sh20 whenever he withdraws money through the ATM, but Sh100 when he withdraws over the counter.
Standard Chartered Bank charges Sh500 for over the counter withdrawals and Sh35 for ATM withdrawals. Withdrawing from another bank’s ATM will, however, see the customer pay Sh250 provided such an ATM is Visa Electron compliant.
Equity Bank customers can also withdraw cash using the bank’s ATMs at Sh30 per transaction but Sh50 for OTC. However, accessing cash from an external but Visa Electron compliant ATM will cost Sh200.
At Co-operative Bank, customers are charged Sh30 per ATM withdrawal. However, withdrawing from another bank’s ATM which should be hooked on the Visa network will cost Sh200.
At Family Bank, reveals a customer, Sh90 is charged for OTC withdrawals and Sh30 for ATM withdrawals on the bank’s machines.
ATM card holders using PesaPoint machines are charged according to the arrangement between banks, other network operators (Kenswitch and Visa) and individual banks. Generally, the cost varies between Sh30 and Sh250. All PesaPoint machines are hooked on to the Visa network meaning that account holders can access their cash from any Visa branded ATM.Why is there a huge disparity between over the counter withdrawals and ATM charges yet the transaction is done on the same account?
An officer in one of the banks told BDLife that the prohibitive charges on OTC withdrawals is meant to push customers to use ATMs in an attempt to cut operational costs, especially on wages and salaries.
He said, however, that some people still insist on queuing in banking halls to make withdraws as they have unfounded fears about the cash machines.
An observation on how people use ATMs reveals that the transactions could end being too costly unless one develops financial discipline. The more the number of transactions via the ATM, however cheap they may seem, the higher the costs are incurred. Thus ATM withdrawals costs could even supercede the costly OTC withdrawals if done haphazardly.
For instance, if you withdraw cash on average 10 times per month, at a cost of Sh30 per transaction, then it means Sh300 is deducted from your account. The cumulative cost translates to Sh3,600 per year. A bank that charges Sh300 for each over the counter withdrawal would see a customer making an average of five withdrawals per month charged Sh1,500. Such charges would accumulate to a whooping Sh18,000 per year!
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