While the readers were horrified when they read that a 5-10 percent fee was imposed on cash withdrawals in an African country, did they think about the situation in Hungary? Not better, just different. Both here and there there is a basic amount that is not penalized, but in our country transfers are also sanctioned. (Opinion article.)
One of the most read articles on our site at the end of last year was about how cash withdrawals are punished – in Nigeria. Obviously, the naming also played a role in this, many people might have been scared that some kind of new face was introduced in Hungary. But the article definitely had and still has a lot to do with Hungarian conditions.
See: We have reached this point: they punish cash withdrawals
In Hungary, cash withdrawals have been penalized for roughly a decade through the imposition of the so-called transaction tax – not actually a tax, but a tax. Many of us are probably so used to it that it doesn’t even appear. What’s more, last summer they raised the bar even higher, extending it to, for example, securities purchases. This does not apply to the State Treasury, with the exception of the county judge, nor does the interest tax apply to government securities.
A finger is cut off, not your whole hand
Cash withdrawals are therefore currently subject to a fee of 0.6 percent, which is quite harsh. It is rough, for example, compared to the transaction costs of the banks, which were originally one to three thousandths, if anyone still remembers those times. It is also rude in comparison to the fact that our money is ours, and one would think that one should no longer have to pay in order to be able to access and use one’s own property.
Individuals are charged a five percent fee and businesses a ten percent fee for withdrawing amounts above the limits – in Nigeria.
Okay, the five to ten percent fee in Nigeria is much harsher. But who is comforted when a finger is cut off, that the neighbor’s whole hand is there? On the other hand, in Nigeria, withdrawing $45 a day is penalty-free (which is about HUF 16,000 at the moment), and we have such relief for HUF 150,000 per month. However, the Nigerian “free” limit is much higher than the Hungarian one, even if it is difficult to withdraw 45-45 dollars a day. (The Hungarian limit amount is always only valid in one bank.)
Here, not only cash withdrawals are taxed
It is at least as sad that we also have a transaction tax on transfers, as if they really want to penalize that too (0.3 percent). Except for the smallest items below HUF 20,000 and the largest items above HUF 3,333,333.3. (This comes out as the fee has an upper limit of HUF 10,000.) So I cannot move my own property between banks without a significant penalty. This is especially serious, since most financial institutions pay hardly any interest on deposits.
Wherever you move, they will take you down.
You pay to keep your money and move it around. Meanwhile, inflation is high (24.5 percent) and untouched money keeps depreciating.
According to MNB data, in the years after the imposition of the domestic transaction tax, the value of cash in circulation increased from 18 percent to 30 percent of household expenses. The weight of the black economy has probably also increased, it’s enough just to wave our card in a market, and you’ll see that a lot of sellers will close their mouths…
Nem Nigeria that deterred meShe example here, but Hungary.
All of this results in the fact that instead of the digitization of money, people prefer not to put it in the bank, because then at least it costs nothing. They prefer cash payments, whether it is transactions between private individuals, gray work, or retailers. One step forward, two steps back, or back to the Middle Ages.
Cryptos are indeed cheaper
Could cryptocurrency be a solution? Yes and no. If I want to invest my money in cryptocurrency, the bank system’s transfer fees and transaction costs will surely take away at least half a percent, plus the costs of currency conversion will also amount to one or two percent. Then comes the cost of the cryptocurrency exchange or cryptocurrency exchange. This can easily be two to three percent in total, maybe less, but even more. Here too, I am much better off if I buy from a friend, although the less of a friend the person is, the riskier the transaction can become. (Like the old street money exchange.)
On the other hand, if my money is already in the cryptocurrency sphere, it can be very cheap. A Bitcoin Lightning Network transfer costs only a few cents, and it is similarly cheap to send money on a litecoin, bitcoin cash or various Ethereum second layer (layer 2) systems. (Polygon, Arbitrum, etc.) Transactions can only be made from a small part of the thousandth, while the turnaround time is a few seconds, a maximum of 1-2 minutes.
Who is the developing country here?
Just find someone who can be paid that way, that’s the big problem. But if crypto spreads, there may come an inflection point, a catharsis, when the scales tip, something breaks. Recently, many opinions have been read that cryptocurrency payments will make more progress mainly in emerging markets, where the banking system works poorly or is unaffordable for citizens.
However, if it is possible to develop sufficiently easy-to-use, meanwhile cheap and secure solutions for crypto payments, then from the cost side, the banking system of developed countries can also become avoidable for the average citizen. Within this, the semi-developed Hungary can be especially on the front line due to the mass of the aforementioned punitive taxes, which burden the circulation of money.
But politicians have an inexhaustible pool of ideas, maybe then they will introduce a gate tax or a smoke tax.
In the meantime, it may be worth experimenting with cryptocurrencies and practicing their use, even in small batches. For some transactions, fintech applications, such as Revolut, can be a way out, for which it has not yet been possible to apply the Hungarian transaction face (although I certainly really want to).
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