The Unused Facility Fee - from Standard Bank

[Justloadit]

I know nothing about overdrafts, but wonder why its secure loan? What is the colateral? I think its an unsecured loan as they may or may not get the loan back and will have to sue for it.

Why don't you use your access bond as facility to borrow (and save for that matter)?

The bank will not give a business an overdraft, unless there is collateral that can back up the loan. In many instances, it is a life policy with a residual value, which has to be ceded to the bank, or it my be property. With out collateral the bank will not give you an over draft. So effectively the OD is secured by collateral, that is why when the bank pulls the OD, most business go under, and the owner has notinhg left, as the bank grabs the collateral.

When you start requesting OD of R100K up, then things change dramatically with respect to collateral.
Access bonds are for personal bonds, and if you still have this facility it is usually a long standing bond, and is is no longer offered to home owners.

[Houses4Rent]

Hi Justloadit

Thanks, lucky that I never had any need or desire for an OD then.

I have 2 access bonds which I use at will. What do you mean they are personal bonds? One of mine is in the name of my trust. It could equally be in the name of a compnay if that compoany owns a property.

I would be surprised if one cannot get a brand new access bond anymore obvioulsy subject to a long list of conditions.

[Blurock]

The bank will not give a business an overdraft, unless there is collateral that can back up the loan. In many instances, it is a life policy with a residual value, which has to be ceded to the bank, or it my be property. With out collateral the bank will not give you an over draft. So effectively the OD is secured by collateral, that is why when the bank pulls the OD, most business go under, and the owner has nothing left, as the bank grabs the collateral.

When you start requesting OD of R100K up, then things change dramatically with respect to collateral.
Access bonds are for personal bonds, and if you still have this facility it is usually a long standing bond, and is is no longer offered to home owners.

Agreed, access bonds are not available to businesses due to some agreement with SARS or the Reserve bank (not sure exactly which).

Wrong; banks do give unsecured overdrafts. Not easy, but it does happen and they are totally irrational in their criteria for allocating facilities. Yes, they do normally ask for collateral, because the banks are actually pawnbrokers. Very few bankers understand or know anything about business.

I know of instances where banks have granted substantial overdrafts based only on the turnover and conduct of the account. In at least one instance they did not even ask for financials and granted R180k without any collateral. The irony of it all is that only 5% of the deposits in the account was due to the account holder!

[Justloadit]

I suppose it depends on the bank managers, and lately, it is a battle to get hold of a decent manager. I would suspect that granting of overdrafts in the current climate may be a tadd more difficult than in the past.

I have been granted a personal OD years ago with no collateral, however it may not be a norm now.

[Houses4Rent]

Wrong; banks do give unsecured overdrafts. Not easy, but it does happen and they are totally irrational in their criteria for allocating facilities. Yes, they do normally ask for collateral, because the banks are actually pawnbrokers. Very few bankers understand or know anything about business.

Is a trust not classed as a business then? I.e. are there no more access vonds for trusts?

[BusFact]

I agree with Blurock's earlier explanation in post #26. I understand why they would have this fee. Basically their customer's are asking them to keep stock exclusively for the customer, without any promise of the customer eventually buying the stock in future. That comes at a cost, even if its only an opportunity cost. I know banks can generate some of their assets out of fresh air, but not all of them.

I don't however have any sympathy for them and they deserve the backlash. They advertise a wonderful, supportive partnership relationship. Then when the customer runs into trouble and can't repay, the vicious and clinical monster shows its true colours. They also provide an over draft facility as a service to customers, which is a convenient way to conduct a business account. They provide this service in the hope of getting more customers. They created this form of service and sell it as a wonderful business tool that can be used to cover short term cash flow shortages. They keep quiet about these new charges (nothing happens over night in banking), because it might scare away potential customers. That's their choice, but they must expect people to get upset when they feel manipulated.

Another example is their insistence on a nominal monthly "service fee" on a bond account for example. It just irritates and screams arrogance to their customers. How many of you bill your customers a monthly fee for the privilege of receiving a statement from you and for the honour of being able to buy from you?

There is nothing wrong with charging their customers for the various services they provide, but if they choose to market themselves as everyone's best buddy and a helping hand, then people will become resentful when these expectations are not met. Damn, we should expect the banks to be mean and aggressive, as we invest our hard earned money with them for safe keeping.

The day I realised that the bank didn't give a continental about me and only wanted my money (just like most other businesses), was the day my stress levels caused by my bankers, reduced drastically. It a cold unemotional relationship I have with my bankers. That's not trying to be mean, that's just the true nature of their business.

Only thing I resent about the bankers is how they lie, sorry I mean market themselves.

[Justloadit]

@BusFact,

Whilst I agree in principal that the banks hold reserves on the amount of your overdraft, the plain fact is not everyone uses their overdraft at the same time. So in the past, their bean counters made the calculations, of exactly how much finance was required to be placed in reserve to manage the overdraft. It is the same game they play with the amount of "CASH' that is available on reserve. If all the account holders approached the bank on the same day to withdraw cash, then the bank would close as they do not have the "CASH" to cover all the deposits in the bank.
The Banks are just getting greedy cos they want to make more money to expand into Africa, it has cost them a bundle in opening in other African countries, because in the other countries they are not allowed to add charges as they do in RSA.

It's all BS, what about the measly cents they give me when my account is in credit? Some times longer than what I use the overdraft facility, so now because I am in credit, I must pay for the overdraft facility as well.

[BusFact]

Victor, you're dead right. The change doesn't really make sense. Although the Basel changes may have changed their calcs significantly, or perhaps not, I don't know and I'm pretty sure most of their customer's don't know either. Bankers created this "problem" and are now trying to fix it. The logical way to do so, well for me anyway, would be to discontinue overdrafts and phase them out or to have this charge on all new overdrafts. That would be a more customer service was of going about it, but that is not what banks are about. That would be a more expensive route, so they choose the more profitable one.

I see the logic I'm afraid. It is money grabbing and greedy, I agree. But for investors and savers (and employees), this is a good thing. For some customers, its bloody irritating. Again it comes down to the false image they create in their marketing. They are not here to make us feel warm and fuzzy inside, or to give our families a better life. We can maybe use the banks to achieve these goals, but need to realise the ruthless corporate we are dealing with.

They give you measly interest on your credit because they don't want it. They want you to rather borrow.

I grew up thinking a bank was a place where you could store and save your money. Nonsense, that's a miniscule part of a bank. Their main focus in the public market is to lend.

[Blurock]

Another example is their insistence on a nominal monthly "service fee" on a bond account for example. It just irritates and screams arrogance to their customers. How many of you bill your customers a monthly fee for the privilege of receiving a statement from you and for the honour of being able to buy from you?

The banks also ask a "service fee" on installment sales. You pay an additional amount for the privilege of placing your car finance with bank A,B or C.
Ask any banker to explain the monthly service fee and you will get any number of bullshit answers. It is only there because we, the consumers, allow it the be there!

[Justloadit]

It is only there because we, the consumers, allow it the be there!

Do we really have a choice following this route?
All the financial institutions charge the same type of fees.
Some people can only afford an installment solution, and the financial institutions know this, and make it their prey.