In this edition of Numsa News we start a new column that will have financial advice. If you have a financial issue that you would like us to cover, write to Numsa News, P.O. Box 260483 , Excom 2023 or fax to 011-833 6330.
The cost of the deduction of monies from clients through stop orders or debit orders is increasing and it is leaving members with less money in their pockets. Read on to find out what you can do to keep these costs down.
There are differences between stop orders and debit orders.
What is a Stop Order? A Stop Order payment is where your employer agrees to deduct monies directly from your salary, and to pay other companies or institutions on your behalf. The company deducts direct from your wages to pay for this.
How much does a Stop Order cost? Although you do not see a separate amount being charged on your salary-slip, the cost of the Stop Order is usually included in the premium you pay for your assurance policy, loan or repayment. This amounts to approximately 21/2% of your premium. For instance if your assurance premium is R30 per month, 75 cents will be for the cost of the deduction and is already included in the R30.
What is a Debit Order?As many employers do not offer Stop Order facilities for employees, Debit Orders can also be used to pay for loans, assurance policies etc. A Debit Order payment is where you authorise a company or institution (i.e. assurance company) to deduct monies from your bank account and then the bank transfers it to the other companies or institutions on your behalf.
Debit Order deductions are made direct from your bank account.
How much does a Debit Order cost? Every time a Debit Order is run against your bank account, your bank charges you a transaction fee (this varies between R2 and R3). With the Debit Order you need to have enough money in your account to cover both the Debit Order amount and the transaction fee. For example if you have a Debit Order of R50 for an assurance premium, you actually need a minimum of R53 in your bank account (R50 premium plus R3 transaction fee).
What happens if I do not have enough money in my bank account?If you do not have enough money in your bank account to cover the Debit Order, and transaction fee, you will be charged a "R/D or Dishonour Fee". This can be as much as R90 per unpaid transaction!
For example, if you have a Debit Order of R50 for an assurance premium, and you do not have a minimum of R53 in your account (including the transaction of R3), your Debit Order will not go through. You will then end up having to pay the bank their Dishonour Fee (e.g. R90) AND you will still owe your assurance company its R50 premium!
If the assurance company runs the monthly Debit Order against your bank account twice and, on both occasions there is not enough money in your account, then your Debit Order agreement will be cancelled.
If this happens, the company will cancel your policy due to non-payment of your premiums. This could have very serious and traumatic consequences for you and your family. You, or a family member, will not be covered in the event of death or disablement. In addition, you might not be able to replace these benefits, or have to do so at a greater cost.
Debit Order Tips:
Make sure that when you sign a Debit Order you have enough money in your bank account to cover the premium. Always remember that the bank will charge you a transaction fee for the Debit Order. You must add this fee (usually between R2 to R3) to your monthly Debit Order amount to get your total monthly Debit Order deduction amount. Check your bank account statement every month.
This will give you peace of mind that only those deductions that you have authorised are being deducted, that the deductions are for the right amount and that any policies that you have bought are in fact being paid for.
Make your Debit Order payment date on the same day (or the day after, to be safe) your salary is paid into your bank account. This will help avoid "R/D or Dishonour Fee". It will also help you plan your monthly budget. Should you have any questions or queries, talk to the bank staff. They are there to help.
(Thanks to the Ferreira Group for writing this piece)
Source
Numsa News