How the banks are ripping you off through Technology, USSD, Illegal Deductions, Bank Charges, interest rates, Transfer charges etc

Despite the recession in Nigeria, the Nigerian banks have been making profits year in and year out, through different banking and nonbanking related services. Although this is good for business these profits are at the expense of the Nigerian customers.

In the developed world, an average bank makes a majority of their profits from financial activities, banking and investment-related practices. But in Nigeria the reverse is the case, an average Nigerian bank makes between 25-40 per cent of their income and profits from non-banking related services. These services are supposed to be additional sources of income and not a major source of income as we currently experience in this part of the world.

In the last couple of years majority of the financial institutions in Nigeria have experienced huge growth in terms of customers base, staff strength, number of branches and most importantly profits. While customers, on the other hand, cannot say the same on their savings or loans instead they get slammed with crazy interest rates, heavy levies, illegal deductions, ridiculous bank rates and charges etc. The Central bank of Nigeria (CBN) who happens to be the regulatory commission for these banks aren’t doing much about it, Could be the fact that they are either not aware of these acts or they have no clue as to what to do about it.

bank rip off

The financial institutions in Nigeria have neglected their core business function and competence which is lending money, investment, credit, savings etc and are now focusing on easy and cheap ways to rip customers off their hard earned cash through many unlawful and unreasonable acts.

According to a report released by Central bank in December 2017, there are over 100 million bank accounts in Nigeria but only about 60 million of them are active. What does that mean almost half of the bank accounts In Nigeria is not active so what happens to the money in such accounts? This year alone majority of the Nigerian banks declared huge and bountiful profits and based on the banking index, most of the banks in Nigeria earn between 25-40 percent of their profits from non banking and non financial related sources such as SMS deductions, ATM charges, illegal deductions, USSD , payment gateway charges, maintenance charges etc.

Ways In which your financial Institutions/ Banks Are  ripping you off

1. SMS : The short messaging service is supposed to be free and value additional services, but has been a major source of income to banks from time immemorial. According to the Central bank of Nigeria (CBN) there are over 100 million Nigerians bank accounts and over 65 million active accounts in Nigeria. For every transaction you make daily, the bank sends you an SMS notification about the transaction, So if a bank has a million transactions in a month, the banks would have made about Fourty Million Naira (40,000,000) monthly from SMS charges in a year that’s over Four Four Hundred and eighty Million Naira (N480,000,000).

I have an account I stopped using and I decided to just keep it, I had about one thousand Naira in the account. Then every month, I get 4 different SMS,

  1. End of the Month transaction summary: Every month I still get a text message of the summary of every transaction that happened on my account even though there was no real transaction, which I am being charged for.
  2. SMS charge notification: Every month I get a message telling me the total amount I am being charged for SMS in a particular month. (note this is not free they are charging me for telling me that they charged me SMS fee, isn’t that ridiculous?)
  3. Unnecessary bank SMS: I also noticed that I get messages like the amount of interest I got on the account, the amount of tax charged on the account

In the process of doing an interbank transfer, I get two or three SMSs :

  1. telling me the total amount transferred
  2. A separate SMS telling me about the amount charged for that transaction. This two messages could have been collapsed to just one.

2. Deductions: There are so many deductions that banks impose on your bank accounts, some are just unexplainable while others are just too ridiculous. If you ask for a copy of your bank statements you will notice some little deductions from your account which we often overlook or we don’t get the alerts,Most of the time, those deductions are little that we just ignore them, but if you think of such deductions wholistically you will realize they run into billions yearly. For example, If all the Nigerian bank decided to deduct 1 naira from all the over 100 million accounts in Nigeria banks monthly. That will be over 1 Billion Naira in a month, in a year that is over 12 billion naira. Remember bank works with numbers. Do not ignore those little deductions.

3. Maintenance charges: Nigerian banks imposes some maintenance charges on your account and also on your bank credit or debit card, like card maintenance charge, account maintenance charge etc. If you may ask me, what are they maintaining?

4. Transfer charges: We often get charged when we do interbank transfers, so for example if there are over 10 million intrabank transfers in a month, the Nigerian banks make between 50 to 100 naira on each of those transfers. So the Central bank of Nigeria (CBN) in conjunction with the Nigerian banks will be making between 500 to 650 million Naira monthly from just bank and ATM transfer Intrabank transfer charges.

5. Other Banks withdrawals: Another way bank rip you off is when you are making withdrawals from another bank ATM after 3 different attempts in a month. The fourth one you get debited 65 naira charge on every other withdrawal you make. So if you are withdrawing One Hundred and Twenty Thousand Naira (N120,000) from the ATM. If after the first 3 intrabank withdraw you will be charged 65 Naira on every other withdrawal.

6. Limiting the maximum amount of cash you can withdraw from an ATM: Now this is the greatest scam of the 24th century. Most modern ATM can dispense 40,000 Naira at a go, but Majority of Nigerian banks as we speak have limited the total amount of cash you can withdraw from the Automated Teller Machine (ATM) to 10,000 or 20,000 depending on the denomination, thereby getting you charged multiple times when you make a transaction.

Quick explanation

If you have an account with Bank A and you are using a Bank A ATM and you want to withdraw 120,000 naira

Instead of the bank ATM dispensing 40,000 in three places, if the ATM has 1,000 denomination, you will get 20,000 each in 6 places thereby you will be paying 6 SMS charges

But in the case where you have an account with Bank A and you are using bank B ATM , If the bank allows their customers to withdraw 30,000 on the go, but because you are using another bank card, They automatically limit your withdrawal to 20,000 Naira per transaction  And you want to withdraw 120,000 Naira from the machine, you will end of paying other bank transaction fee of 65 naira, six different times if the denomination is 1,000 naira and in the case where it is 500 naira and you can only withdraw 10,000 you will be charged 65 Naira 12 times and in addition you will still pay the 4 naira SMS charge in 12 places and most of the times, your bank still sends you a different message for the other bank withdrawal charge, thereby you get a total of 24 different SMSs that you will pay for. Isn’t that ridiculous?

7. lower denomination in ATM: Gone are the days when you get higher denomination in Bank ATMs. But these days, banks purposely stock their machines with lower denominations just to attract multiple transfers and withdrawals from your account.

8. Dead peoples Money; this is the biggest scam that has been kept under the radar for a long while. Unlike before where your account goes into dormancy and after many months of usage, but somehow banks have learnt to keep some of these accounts active and lots of dead people have lost ownership of their accounts. I feel banks should be able to initiate a search or communications with an account that has money and has not been active for over a year or two.

Therefore always go back and update the Beneficiaries or next of kin details on your account. Also, you are only doing the banks a favour when you have an account that none of your family knows of. A friend of mine whose dad died like 15 years ago are still trying to recover the One Million naira his dad deposited in his account before he died. The sad part is they don’t even know the bank and the money belongs to his friend. He didn’t keep any trace of any of his accounts at home.

9. Unbearable interest rates: Another crazy ways banks rip you off is through crazy interest rates. Most of the time when you approach a bank to borrow money, with interest rates as high as 30 per cent.

10. FX Transactions: I have been doing online businesses since 2008 and somehow I get to transact or get paid in foreign currency mostly dollars. Lately, I realized when I send out money, the banks will charge me the black market rate, which is about 368 naira, but once I am receiving money, the banks charge me the Central bank rate. This is a total rip off, why use two different standards for this same transaction.

So what that means is this. If the value of $1,000 in the black market is 368,000 and someone sends me $1,000 the banks will only pay 332,000 naira which is like the official CBN rate. I have lost about 33,000 naira just because I received money in my account. But If I decide to buy something from the United States or in Dollars, Guess what? The bank charges my account the black market rate of 368,000 naira. This is what I call Bank Scam.

11. Minimum bank balance: Now almost every bank has a minimum bank balance. That is the minimum amount of money you must always leave in your account come rain come sunshine, It is that money that you have that you can never touch. Technically it’s your money that belongs to the bank. The only time you have access to these funds is when you want to close your account. I still wonder why banks must impose a minimum balance on my money.

12. Unclaimed Accounts: Now There are so many dead people or unclaimed accounts in so many Nigerian banks as we speak. Either due to the fact that the account owner forgot they had an account in the bank, due to death of the account owner, due to irregularity in the bank account due to Bank Verification Number (BVN), a dormant account that was forgotten etc. Ever wondered what happened to those funds? Some banks have found a way to ensure those funds keeps recycling within their system when such funds are supposed to either be forfeited to the Central Bank of Nigeria or claimed by the real owners or beneficiaries of the funds.

13. Transaction Charges: If you run some certain type of account, you should expect some charges, for example, if you run a current account and a domiciliary account, your bank impose some transaction charges when you withdraw or make certain transactions. Sometimes it’s hard to calculate these figures but you need to understand how it works. I have a domiciliary account that every time I withdraw money from the account, I get two extra charges, 1 per cent of the total transaction and 10 per cent of the 1 per cent. This is crazy right?

Always ask questions when you find irregularities or illegal deductions on your account. The banks are becoming a mega-institutions at the expense of their customers.


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