In light of the recent hikes in the petrol price, is it possible to offset this cost – or at least some of it – by becoming a more savvy petrol shopper?
In addition to cash, petrol cards, debit cards and cheque cards, increasingly petrol stations now also accept credit cards. Whichever method you use to pay for petrol, it’s costing you – be it card fees, transaction fees and/or interest.
So what is the most cost-effective way to pay for petrol? As always, it depends on your circumstances: the type of account you have and your banking habits.
As of November 2, the most recent increase, petrol costs you an additional 23 cents a litre and diesel an extra 36 cents a litre. Assuming your tank takes 45 litres of petrol, it now costs you about R477, or R10.35 more, to fill up inland. Ninety-three octane costs R10.60 a litre inland and 95 octane petrol sells for R10.47 a litre at the coast. The wholesale price of diesel with a sulphur content of 0.05 percent is R9.81 at the coast and R10.01 inland, but the retail price of diesel varies among filling stations.
The advantages and disadvantages of the various ways of paying for petrol are discussed below.
CASH
Cash is king, or so the saying goes. But is it really? Not always. Withdrawing R500 from your bank’s ATM can cost you R9 if you bank with Absa and have a standard current account. It will cost you even more if you withdraw the cash from another bank’s ATM.
Depending on where you bank, you may be able to escape cash withdrawal charges altogether if you maintain a minimum monthly balance of R10 000 in your account. On some accounts, maintaining a certain minimum balance entitles you to either unlimited or a limited number of free transactions a month. However, these accounts earn little or no interest.
Certain accounts, such as Absa’s Platinum current account, have unlimited free transactions of a certain type in return for a fixed monthly fee. Other accounts, such as Standard Bank’s Prestige account, offer a limited number of free transactions a month.
The Platinum and the Prestige accounts are aimed at clients with an income of at least R25 000 a month. Professionals with certain degrees and who earn at least R5 000 a month also qualify for a Prestige account at Standard Bank.
Absa’s Platinum account costs R180 a month and Standard Bank’s Prestige account costs you R209 on the fixed monthly fee option.
Alternatively, Prestige clients can go for the pay-as-you-transact option, which has a minimum monthly fee of R85.
If your transaction charges are less than R85 a month, the bank still charges you R85 a month. If your transaction costs add up to more than R85 a month, you pay for each transaction after you’ve spent R85.
With the fixed monthly fee option, Prestige clients receive, among other things, 12 cash withdrawals from a Standard Bank ATM. Once you exceed your 12 withdrawals, it’ll cost you R3.90 plus 1.17 percent of the value of your transaction each time you draw cash from a Standard Bank ATM. So it will cost you R9.75 to draw R500. It costs you even more if you draw from another bank’s ATM.
Standard Bank clients with Prestige, Elite, Achiever or Achiever Go accounts would pay a whopping R16.45 for a R500 withdrawal from another bank’s ATM.
Drawing from your own bank’s ATMs and drawing large sums of cash less frequently may enable you to save on cash withdrawal fees. If you don’t know what you’re paying in cash withdrawal fees, make a point of finding out.
CREDIT CARDS
Since July 2009, when regulations were changed to allow retailers to accept credit cards for fuel purchases, the major fuel retailers have been phasing in facilities to enable customers to pay with plastic in all its forms. Apart from the convenience to the customer, petrol stations want to minimise their exposure to crime by handling as little cash as possible.
Of the 1 100 Engen stations countrywide, about 600 accept credit cards and most accept debit cards, Pierr Roodt, the retail marketing manager at Engen, says.
The acceptance of cards is at the discretion of the individual who owns the garage, Roodt says.
More than half of all fuel sold by Engen is paid for by cards, he says.
Caltex, which has about 800 stations nationwide, accepts debit cards at “90 percent of service stations” and all forms of card payment at selected stations, Teresa Booth-Oliveira, the general manager of products at Chevron, says.
Shell has almost 700 stations around South Africa, of which 450 take all cards and the rest take debit cards, Vuyiswa Mamputa, the local brand and marketing implementer for Shell, says.
But is it a good idea to buy fuel on credit? That depends on how disciplined you are at managing your credit card.
A credit card can be the most cost-effective method of payment, because there are no transaction costs. There are annual fees, but these are sometimes included in a bundled account.
Remember that when you pay with a credit card, you’re using the bank’s money and not your own. The bank lends that money to you interest-free for between 25 and 50-odd days. But after that grace period is up, the interest rate is typically very steep.
To save yourself interest, be sure to pay off your credit card in full before the interest-free period expires. If you don’t, you can easily be caught in a debt trap.
In an article entitled “Managing your debt” on Standard Bank’s website, the bank says it is wise to use credit only to buy assets, and if you have to use credit to buy consumables – such as petrol or food – you should pay it off as soon as possible.
“One of the golden rules of good money management is to ensure that you are not paying for something you no longer have or use,” Standard Bank advises.
What does it cost you to buy petrol on your credit card?
At Absa, First National Bank, Nedbank and Standard Bank, the transaction itself costs you nothing. The big four banks regard fuel purchased on a credit card as a regular retail purchase, so you benefit from the usual interest-free period set by your bank. But once the interest-free period is up, you pay interest at the rate that your bank charges you.
Your interest rate will be determined by your credit profile and the type of credit card you have. Credit card interest ranges from nine to 21.1 percent a month.
On most credit cards, the interest rate is about 17 percent, which is hefty considering that the prime rate is only nine percent. Only clients who qualify for credit cards at the top end of the market pay interest of nine percent.
Capitec does not yet offer a credit card. The bank plans to launch one in the new year.
DEBIT/CHEQUE CARDS
Safety and convenience are the big selling points of a debit card. Carrying cash is dangerous and debit cards are the answer, but what does it cost you every time you swipe your card?
Capitec clients enjoy unlimited free debit card transactions.
The bank’s only account – the Global One account – comes with a debit card that attracts no transaction fees when the card is swiped.
Absa clients on the Platinum package get unlimited free debit card transactions, while those on bundled pricing options, such as the Silver and the Gold current account packages, enjoy limited free transactions, including debit card transactions.
Absa’s Mzansi clients pay a flat fee of R2 for every debit card transaction. And clients on Absa’s pay-as-you-go accounts pay R3.75 plus R0.75 per R100 or part of R100.
So, if it costs you R477 to fill your tank, it will cost you R7.50 to use your Absa debit card if you’re on the pay-as-you-go option.
Nedbank clients with bundled accounts, such as the Savvy Electronic or the Everyday current account, have unlimited debit card purchases included in their monthly fee.
Nedbank clients with current accounts and who are on the pay-as-you-use payment option pay R3.65 for debit card transactions, while Transactor Plus or Savings Deposit account holders pay R2.25 for debit card transactions.
For clients on Nedbank’s Ke Yona account, debit card transactions cost a flat fee of R1.
Standard Bank’s debit card charges also differ according to the underlying account. For example, clients who pay a fixed monthly fee on some current accounts don’t pay to swipe their debit or cheque cards. But clients who are on the pay-as-you-transact option pay R3.75 plus 0.75 percent of the value of the transaction, with a maximum fee of R17.
First National Bank clients can use a cheque card to pay for petrol and incur no additional charges – unless you have a petrol card linked to your cheque account, in which case you pay R3.90 per transaction. Transactions with an Electron debit card cost R2.75 for clients on the pay-as-you-use option, but are included for those on the unlimited option.
In a recent survey on bank charges, the Solidarity Research Institute notes a distinction between debit and cheque cards, which function much like credit cards and allow for online purchases.
The institute says cheque cards and debit cards typically incur the same transaction fees, but it’s more expensive to replace a cheque card than it is a debit card.
TILLPOINTS
Remember that you can also draw cash from tillpoints at retailers. If you’re a Capitec client, it’s cheaper to draw cash from a tillpoint than from the bank’s ATMs.
Capitec charges its clients a flat fee of R1 to draw cash from Shoprite, Checkers, Pep, Pick n Pay and Boxer stores. (You have to make a purchase in order to draw cash at Shoprite, Checkers and Pep.)
First National Bank (FNB) clients who pay a fixed monthly fee for transactions can make an unlimited number of tillpoint withdrawals at no additional cost. FNB clients with Easy Plan, Smart or Personal accounts and who are on the pay-as-you-use option pay a flat fee of R0.90 irrespective of the amount withdrawn.
At Absa, clients with packages (what the banks call bundled options) can draw cash from tillpoints at no cost, until the number of bundled transactions is exhausted.
Depending on the bank, a package can include access to an overdraft facility and a credit card. Packages are offered to clients who are middle- to high-income earners.
Absa clients who have pre-paid debit cards can withdraw cash from tillpoints for free. But Absa’s Mzansi clients pay a flat fee of R4.75 to draw cash from a tillpoint. The Mzansi account is a transactional bank account aimed at people with a low income.
Standard Bank’s Mzansi clients pay R3.50 for cash withdrawals at tillpoints, while Eplan clients pay R5. Clients with a current account on the pay-as-you-transact option pay R3.75 plus 0.75 percent of the transaction, up to R17. Standard Bank’s clients with current accounts on the bundled option don’t pay for tillpoint withdrawals.
For clients with Nedbank’s Ke Yona account, drawing cash from Pick n Pay and Boxer stores costs a flat fee of R1.
Nedbank clients with current accounts and who are on the pay-as-you-use payment option pay R3.65 for cash withdrawals at tillpoints. The bank’s clients who don’t have current accounts but who have the pay-as-you-use payment option pay R2.25 for cash withdrawals at tillpoints.
GARAGE CARDS
Trade union Solidarity’s Research Institute chose not to include garage cards in a recent survey on bank charges, because they’ve become largely redundant. “Most filling stations, if not all of them, now also accept payment by debit and credit cards, which makes a petrol card unnecessary,” the report says.
Standard Bank says its garage card is still on offer because some fuel stations do not yet accept cheque and credit cards.
The bank charges an annual fee of R115 for a garage card and a flat fee of R3.85 for each transaction. For clients with a bundled pricing option, garage card fees are included in the bundle.
A Standard Bank garage card must be linked to a current account or a credit card. If it is linked to a current account, purchases made on the card are debited to the current account. If it is linked to a credit card, purchases made on the garage card are debited to your credit card – in other words, they are treated like any other debit on your credit card.
The same interest rate charged on your credit card applies to purchases made using a garage card that is linked to your credit card. So if you have a credit card with Standard Bank, it makes more sense for you to use your credit card. The only time a petrol card would be more useful is if the petrol station doesn’t accept credit cards.
The interest rate charged on a credit card differs from client to client, depending on the client’s profile.
If your Standard Bank garage card is linked to your credit card, your credit card limit applies. If it’s linked to your current account, there is no limit to the credit on your garage card, which can be used for all motor-related expenses.
Beware though: if you have an overdraft on your current account, and your account goes into overdraft, transactions associated with your garage card will be debited to your overdraft. The banks do not allow you to buy petrol on a budget facility.
A garage card from Absa can either function as a stand-alone card with its own account or be linked to your credit card. A stand-alone garage card functions separately, with its own limit, and is paid separately.
When linked to your credit card, the Absa garage card shares the same limit, and transactions are included in the minimum payment due. Absa charges R3.50 per garage card transaction.
Nedbank offers a garage card linked to a current account, as well as a garage credit card.
Petrol transactions on a garage card linked to a bundled product, such as the Everyday and the Savvy current accounts, are free.
Nedbank’s garage credit card incurs a monthly fee of R14.25 and a transaction cost of R3.65 per swipe.
First National Bank (FNB) offersa stand-alone petrol card at a cost of R275 a year. This annual fee includes membership of the Automobile Association. Every time you swipe the card to pay for petrol or other motor-related expenses, it costs you R3.90.
FNB also offers clients a petrol card that can be linked to a cheque account. If you are on the pay-as-you-use option, each time you swipe the card, it costs you R3.90. But if you’re on the unlimited option, these costs are included in the monthly fee. The card incurs a monthly fee of R10 (or R120 a year).