Get the best of both worlds with the Nedbank EasyAccess Deposit Account

Most people need liquidity just as fish need water, but do not realise how much they need it until they no longer have it. Even long-term investors need short-term liquidity.

To meet these requirements, Nedbank has launched a new product, the ‘Nedbank EasyAccess Deposit Account’, which gives clients the best of both worlds.

Carmen Whateley, Head: Funding, Forex and Payments at Nedbank and her team spend most of their time listening to client needs, trawling for the best solutions, and endeavouring to give them what they need.

The EasyAccess Account, she says, is a fixed term deposit account of three, six or 12 months with a built-in liquidity cushion. 50% of the original capital is fixed for the duration of the product; the remaining 50% is available with 24 hours notice.

The minimum deposit is R2 000 and a maximum of two withdrawals are allowed with no questions asked and no penalties charged. Withdrawals are a minimum of R1 000 each.

‘The EasyAccess Account follows our highly successful ‘Park-It’ investment account that required a minimum deposit of R10 000, fixed for 14 days, beyond which money in the account is available on 24 hours notice’, says Whateley.

‘However, the recent global credit crisis made us a lot more sensitive to client’s existing and potential anxieties about illiquidity, and hence our decision to take the ‘Park-It’ concept a step further.

The beauty of the EasyAccess Account is that it is highly competitive in the fixed interest arena, is not a drag on performance, it provides security of capital, and it is flexible,’ she continues.

On 12 months the account will yield 7.50% per annum compared with the normal Nedbank Fixed Deposit Rate of 6.75%. The average market rate is 6.80%.

The corresponding six-month yield is 7.00% per annum compared with the Nedbank Fixed Deposit Rate of 6.50% and the average market rate of 6.50%.

The three-month yield is 6.70% per annum compared with the Nedbank Fixed Deposit Rate of 6.30% and the average market rate of 6.30%.

Whateley points out that a downside of money market funds is that interest rates may continue to fall over the next few months. This may come about with a further decline in domestic inflation and/or the need for a sharp rebound in business confidence. ‘We have to remember that we are still nowhere near being back to the strength of economic activity we saw before the credit crisis.’

She believes that the EasyAccess Account will meet the specific needs of several niches. The Seniors' market, for instance, is particularly important in that most senior citizens place a high premium on balancing the need for maximum income with access to immediate liquidity if required. They may require significant cash to meet expenses in a host of emergency situations, ranging from medical costs to home maintenance.

‘Medical costs are unpredictable’, she points out. ‘A person can be healthy one moment and sick or disabled the next. Although these expenses may form part of a household budget such as contributing towards a medical aid fund, it is impossible to budget for unforeseen events’.

Income is paid monthly or on expiry, depending on the client’s request. The rate of interest is determined and fixed at the time opening of the account.

At the other end of the spectrum, Whateley points to investors who might wish to have money available to invest in equity or other markets, when appropriate opportunities arise.

More broadly, she notes, many investors have learned that exiting a conventional fixed deposit investment can be extremely painful. Not only might it require considerable negotiation, but the transactional costs and penalty fees could be unpleasant. The EasyAccess Account gives the investor a fair share of control over his or her investment.

Another of its competitive edges is that no costs are incurred. This compares, for instance, with money market unit trusts that may require, for example, an original price of 100 basis points and an annual fee of 0.6%.

Prior to the recent economic crisis, investors piled into cash management products in droves with little attention to fees. The big attraction was the high yields that were being paid. This has since changed.

‘We regard it as extremely important to interact with clients, understand their needs, and provide them with appropriate options. Furthermore, clients who open an investment account now have the opportunity to link the account to a Nedbank Affinity of their choice,’ concludes Whateley.