There is no such thing as a free lunch – Hidden costs of free services

hidden costs
06 Sep 2023

Top five most common hidden costs in South Africa and how to spot them

How many times have you heard that there is this “free service” or extra benefit that you get if you pay now, sign up, get registered etc? Let us be the first to tell you that it is not free. You are paying for it somewhere. The cost of that service, product, or “gift” has been worked into your fees somewhere in order to ensure that business doesn’t lose money. It would be great if we got things for free, but inevitably you will get what you pay for.

South Africa’s diverse economy and a vast range of industries can make it difficult to keep up with everything one has to look for when trying to manage one’s costs. Many of these hidden costs often lurk in businesses and personal finance and may be challenging to identify, but they can add up and become a significant financial burden.

Banking fees

Banking fees are one of the most common hidden costs in South Africa. While many people assume that bank accounts are free, they often come with hidden costs that can add up over time. For example, there may be charges for ATM withdrawals, bank transfers, and monthly account fees. It’s essential to read the fine print on your bank account agreement and understand what fees you may end up paying. If you’re not sure, speak to your bank’s customer service representative and ask them to explain any charges that you don’t understand.

Credit card interest

Credit cards are a convenient way to pay for goods and services, but they come with high-interest rates that can quickly add up. Credit card programmes often offer attractive rewards and cashback programmes, but they make their money by charging interest on outstanding balances. If you carry a balance on your credit card, you could end up paying much more in interest charges than you received in rewards. It’s crucial to pay off your credit card balance in full each month to avoid these fees, and to do it as soon as possible. Every time the interest rate goes up, so do your repayments!

Insurance premiums

Insurance premiums are another common hidden cost in South Africa. While insurance is essential to protect yourself against unexpected events, it can be tricky to navigate your costs. Many people assume that their insurance premiums are fixed, but they can increase over time due to inflation, changes in your circumstances, and changes in the insurance industry. It’s essential to review your insurance policies regularly and don’t be afraid to get in touch with your insurance company if you don’t understand your fees or your policy. There is an industry-wide policy in place called TCF which stands for Treating Customers Fairly to try and minimise this exact problem and a few others- you can read how we uphold our pledge to TCF here.

Cell phone and internet costs

Telecommunications and data costs can be another nasty surprise. Many people assume that their cell phone and internet bills are fixed, but they can add up quickly. It’s crucial to review your monthly bills and check for any charges that you don’t understand. For example, you may be paying for services that you don’t need, such as premium TV channels or data bundles that you don’t use. If you’re not sure, speak to your telecoms provider and ask them to explain any charges that you don’t understand.

Electricity bills

This one is a particularly sore point: Electricity bills were found to go up during loadshedding! You would assume that electricity bills would go down, but this is not so. They can even vary significantly depending on your usage patterns and which appliances you use. It’s crucial to review your monthly bills and check for any spikes in usage that you don’t understand. For example, you may be using more electricity than you need to due to inefficient appliances or leaving lights on when you’re not in the room. It’s essential to be mindful of your electricity usage and take steps to reduce your consumption where possible.

These hidden costs can be a significant financial burden. It’s essential to be aware of these costs and take steps to identify them. By reviewing your monthly bills, reading the fine print on your contracts, and speaking to your service providers, you can avoid these hidden costs and save money over the long term. Remember that every rand counts, and small changes can add up to significant savings over time.

Need some help checking out any of your service contracts? Use our legal advice line to make sure that you’re not paying more than you have to.

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Written by Mokgadi Selebalo – Debt Advisor at Legal&Tax.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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