Small banks pay higher interest to savers

Kampala, Uganda | THE INDEPENDENT | Saving with a smaller bank earns you a better return than you would get with glamorous bigger banks, analysis of the latest Bank of Uganda data compilation shows.

The data which shows what the banks pay you and charge you shows that commercial banks outside the top five banks cluster were more generous in compensating people who trust them with their money, a move seen as an enticement to attract depositors.

Bank of Uganda publishes commercial bank’s data on charges to promote transparency in the provision of banking services to the bank. The data helps you pick a bank that offers a better deal.

Smaller banks pay higher interest of much as 3 percent per annum for saving your money with them. Cairo International bank, GT Bank and Housing Finance bank seem to offer the best deal with all of them indicating they will pay 3 percent interest for the money you keep with them or on your savings account.

KCB and Tropical Bank pay 2.5 percent annually for a savings account while United Bank of Africa, Finance Trust and Baroda pay 2 percent. Other banks pay between 1 percent and nothing. Sometimes a savings account comes with conditions like allowing you to withdraw once in three months and not drawing your account beyond a certain amount.

Some banks offer the best deals on fixed deposit accounts which is equivalent to lending them your money. With this account, you offer to place your money on an account for a specified period of time and they pay you interest. From BoU data, Tropical bank emerges with the best offer. It will pay you 8 percent annually when you run a fixed deposit account with them.

Opportunity Bank and GT Bank will pay 6 percent on your money if you open a fixed deposit account. Equity Bank pays 5.5 percent, KCB 5.5 percent, DFCU 5.1 percent, Orient Bank 5 percent, Ecobank 5 percent, ABC Capital 4.5 percent, Bank of India 4 percent, Baroda 4 percent, Exim 4 percent, and Standard Chartered 4 percent.

For some banks, one can negotiate a rate especially if you wish to fix large amounts of money. Another area to evaluate whether your bank is draining you or not is to look at the charges and penalties they place on your account. For instance, while some banks will not charge you for going below the minimum amount on your savings account, others will penalize you.

Bank of Africa (BoA) puts the harshest penalty of 22,000 Shillings for going below the minimum balance. Standard Chartered penalizes you with a 20,000 Shillings fee while DFCU charges 16,000 Shillings. Absa bank will charge 15,000 Shillings for going below the minimum balance.

Equity bank, GT Bank, Opportunity, and Tropical Bank will not penalize you for falling below the minimum balance, BoU data shows.

While a lot of banks will tell you no charges for acquiring a financial statement for your account, others will charge you an arm and leg. Orient Bank for instance is the most expensive in this area, charging one 5,000 shillings per page when you request for a financial statement. Equity bank will charge you Shs 3,700 per page while Baroda and Cairo International charge 3,450 shillings per page. Tropical bank charges 3,000 shillings for a statement.

A lot of people look for banks where their salaries can be channelled but get hurt when the bank charges are high.

Standard Chartered Bank and Stanbic Bank are the most expensive banks to receive your salary at, charging 5,000 and 4,000 Shillings respectively whenever your salary drops on the account. KCB and Tropical bank charge 3,000  Shillings and the rest of the banks charge 2,500 Shillings when your salary is received.

Another area where people pay unprecedented amounts is on acquiring and the usage of the ATM card. ABC Capital and Housing Finance have the most expensive ATM card issuance fees at 20,000 Shillings. Other banks charge between 10,000 and 15,000 Shillings. Only Baroda and DFCU offer you an ATM card for free.

But when you lose your ATM card, Baroda will charge you the highest at 28,750 Shillings to replace it. Other banks change between 10,000 and 20,000 Shillings for a replacement. Charges on ATM withdrawals hover between 600 and 1,500 per transaction across the industry.

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