Don't Get Skinned: Negotiate Your Bank Charges

You're Likely To Pay Much More, If You Don't

Banks charge for most services they render to customers. They are in business and will seek to cover their costs and make a profit. If they could, they would perhaps maximise charges to boost their earnings.

Why You Should Worry
The good news is that competition is relatively strong in the sector, providing a measure of protection to the bank customer. As banks content with each other to win customers, the spirit of competition is bound to compel some moderation in the pricing of their services. Does this totally eliminate concern about what you are charged? Certainly not. For one, there is some measure of price discrimination between customers of the same bank: banks do not charge uniform rates to all their customers. Rates vary, depending on each customer's level of transactions and, yes, their level of awareness and bargaining power. A customer with a huge transaction volume who knows nothing about what to ask for or fails to bargain effectively may end up paying a higher rate of charges than a smaller, better-informed customer. In most cases, while billing may be automated, the applicable rate is manually inputted for each customer, based on negotiation.

Why The Bankers' Tariff Is Not Sufficient Protection
To provide protection to customers, the Central Bank and the banks, under the auspices of the Bankers' Committee, agree to a bankers' tariff which identifies most services provided by banks and specifies upper limits for applicable charges. Banks generally obey the tariff, but instances of violations are not uncommon. The CBN has often highlighted such violations in its examination reports on individual banks, often penalising such banks and demanding restitution to the customers. The tariff is however not readily available to the banking public who ought to be guided by it. Besides, the tariff is more concerned with the upper limits of charges. Banks are not expected to charge above the stipulated rates, but can and do charge less. The Bankers' tariff specifies, for instance, commission on turnover (COT) rate of N5 per mille (that is, N5 per N1000) of debit transactions in the customer's current account. Generally, this is what your bank may charge you. What you may not know is that your COT rate may be much lower than N5/mille if you negotiate well. In a typical bank, rates will range from zero to N5. Strong, hard-bargaining customers may secure a complete waiver of COT while an unknowledgeable customer is charged the full N5. Others will fall in-between those figures, depending on each customer's bargaining strength. This scenario applies also to most other rates: approval fees, management fees, LC commission, interest on facilities, etc.

What to do
Your ability to secure a reduction and to what extent will depend on your negotiating strength. This is both a function of your volume of transactions and your knowledge of what is possible. Now that you know, simply check to see that you are getting a fair rate. If you consider your volume significant, may be its time you sat down to negotiate with your bank on the various rates charged to your account. Part of the process may include talking to different banks and looking for the best overall package. Service enhancements may also be part of the bargain. Are there beneficial ancillary services given by the bank, possibly for free? If any, quantify these benefits, to rate each bank.

While you must be sure you do business with a bank you trust - strength and quality of service are important factors- be sure too to secure the best terms for using their services. Shop around or ask questions. Where necessary, talk to a financial expert. Don't just assume that banks are saintly in charging their customers. They are not and will extract the maximum fees, if they can. If you believe you are doing enough business with a bank to justify getting better than the standard charges meant for the average customer, do not short-change yourself: ask the bank for reduced charges. If they believe that your business volume justifies your request and that they would rather cut the revenue generated from you than lose the entire account, they will do the wise thing and accede to that request. Besides, they know that a satisfied customer can always bring more business.