We should all say thank you to Tito Mboweni, the governor of the Reserve Bank, who successfully put pressure on the banks to pass on the full one percent by which he reduced interest rates last month.
Initially, the major banks, in tandem, only reduced their lending rates by 0.75 percent.
Mboweni - who has quite a lot of influence on the interest rates we pay and/or receive - claimed the banks had unfairly held back 0.25 percent, instead of passing it on to consumers.
The banks are obviously in better financial shape than their public pronouncements might lead us to believe. When interest rates were high, the banks experienced a surge in bad debts and had to repossess homes, on which they had to pay outstanding rates and services accounts. Now that interest rates have come down, the banks do not have to shoulder these expenses.
Although the banks have moved interest rates up and down in tandem for many years, this does not mean you cannot shop around and get a better deal on interest rates and service charges.
Recently, I threatened to close an account and open one at another bank, which offered lower charges, and move a mortgage bond, unless I got a better deal. I obtained satisfaction with the mortgage bond, but I moved my current account after 12 years with the same bank.
What interested me was the ease with which I could change accounts. Among other things, the new bank sorted out all my debit orders.
Consumer power
Mboweni says consumers should use their power to influence banks - and you do have power. If you are looking to borrow money, particularly over the long term for such things as a home loan, shop around and negotiate. Don't take the first deal you are offered, particularly if it comes via an estate agent, who will only be interested in the introduction fee the bank will pay.
Shop around if you already have a mortgage bond. It will be worth the expense of moving your loan if you can get half a percent less somewhere else. Some banks will even reduce the legal fees incurred in registering a new bond.
On a R100 000 home loan, a half a percent reduction in a bond will save you R20 143, and reduce the bond repayment period to slightly less than 17 years and five months from 20 years. The de-registration and re-registration costs of a bond should be about R2 000 - and some banks will get you discount prices.
Go to the Financial Tools section of the Personal Finance website and calculate how much a half percent will save you over the years with the Loan and Extra Repayments calculators. You will be surprised how much it is.
I recently read a column by a colleague in a sister newspaper in which she said that as long as South African banking was dominated by the "big five", consumers will have very little choice. It will require a large foreign player to enter the market for real competition to take place.
I am not so sure.
Online options
Firstly, Investec Bank is successfully creating a low-cost virtual banking service for top-end clients. Investec is doing so without building a retail branch structure.
Old Mutual is in the process of launching an internet-based savings and loans-type operation aimed at the middle-income market that will role out over the next few months.
BoE, through its PepBank subsidiary, is making banking more accessible to the lower end of the market. PepBank is using a low-cost, low-service branch and automated teller machine structure.
Banking is not the same as it was 20 years ago, when there was a branch in every dorp and one in every street in the cities. We are in the computer age and banking is one of the industries which is vulnerable to low-cost competition via telephony and computers.
Our front-page report this week is about the launch of the 20twenty virtual bank, which has the backing of the moderately-sized Saambou. 20twenty is South Africa's first truly virtual bank: It is not involved in any other operations apart from bringing electronic transactional banking to retail customers.
Whether 20twenty will succeed has yet to be seen, but it will increase competition. One of my gripes about the major banks is that despite introducing internet and telephone banking, they have not reduced their charges to customers - in fact, most have increased them. You pay the normal charges plus internet fees.
The banks claim the reason for this is that they have to install systems to provide internet banking. What they do not tell us is how much they have saved in reducing the hugely expensive branch structures they have been operating up until recently.
The only way banks will improve service to you and reduce costs is if you follow Mboweni's advice and put pressure on them to reduce costs and improve service.