What Type of Bank Account Should I Get?

If you’re thinking What type of bank account should I get? you need an overview of the type of bank accounts available. Broadly speaking they are of two types, those which cost money but provide a lot of flexibility, and those which come with a lot of restrictions but they make you money instead.

Accounts that are more flexible are generally called transaction accounts. They are designed to make your regular financial transactions as efficient, convenient and hassle-free as possible, like:

• depositing your pay packet
• making automatic payments to your power and gas or phone company
• operating a chequebook
• banking via the Internet
• using ATMs and EFTPOS facilities
• getting access to an overdraft (usually subject to a credit check)

Transaction accounts charge a monthly fee and can have different features like a limit on the number of transactions a month. If you exceed the number of transactions, the fee goes up.
Some accounts may have no limit on the number of transactions, but they charge a correspondingly higher fee.

You may be attracted by a transaction account that has no monthly fee, but be aware these usually come without other features like doing your banking online.

In short, with a transaction account, you pay the bank a fee for the convenience and ease of carrying out your regular financial dealings.

Some transaction accounts will pay you interest, but generally the interest rate is lower than what you could earn with a savings account.

The Type of Account that Makes You Money

If you haven’t found the answer to your question: ‚What type of bank account should I get? then this section might help.

Savings accounts are the second major type of bank accounts after transaction accounts. You take money from the bank in the form of interest and the bank buys the right to invest your money, while promising to give it back to you when you want it.

A savings account is excellent when you have a specific goal in mind, like a holiday, a new car or to pay off a student loan. The more money you save, the more interest the bank will pay you.

There are a few wrinkles to watch out for with a savings account. Some require a minimum account balance before any interest is paid. Some will allow you to operate the account like a transaction account but usually you are limited in what you can do and how much you can spend.

Some savings accounts have tough rules that you must follow. For example, if the account balance goes below an agreed minimum amount, the penalty fees charged could make your eyes water.

Hopefully this basic guide has answered your question: What type of bank account should I get? Once again, the type of account you choose is the one (or the mixture) that matches your circumstances.

Below are the typical bank accounts available for consumers:

Transaction bank accounts:

If you need a solution to deposit your pay or a way to easily pay your bills then transaction bank accounts are the tool for you. Some of them limit the amount of transactions you can do or else they will charge you extra fees while others include unlimited transactions.

Usually a transaction account has a monthly fee. For unlimited transactions, the fee is generally higher.

There are also a third type of transaction account, those without a monthly fee. But these are very limited and don’t offer extra features like getting access to your account with the Internet.

The good and the bad of transaction accounts:

On the upside you can use these accounts for everyday access to your bank while keeping the fees to a minimum. If you don;t intend to use EFTPOS, ATM or telephone banking facilities to an excess then choosing a low cost account is probably your best bet.

For high users and demand the fees will be higher. Another great features of some accounts is the overdraft facility (subject to credit approval) or a cheque book facility.

On the downside, you don’t earn any interest n savings with this type of account. Only a few of them do pay you some interest but these rates are lower than on a savings account.

Savings bank account:

Most Australians have a savings bank account of some sorts. These accounts are ideal for saving money. Whether you want to save up for a holiday, a special occasion or for the fun of savings, this type of account pays you interest on your savings.

The more money you save, the more interest will be paid. The trouble of savings accounts is to choose one that suits you. You can also use a savings account for everyday banking.

You can elect to open a savings account with a monthly fee or if you don’t like to pay a fee you can select one without. Just be aware that a spending limit might apply. Other accounts will require a minimum account balance for you to earn interest on it.

There are certain savings accounts that are purposely offered for online banking only. These are normally linked to a transaction account but pay you more interest. Accounts like these are usually fee-free but you still pay fees on the primary account.

The good and the bad of savings accounts:

Saving accounts pay you higher interest rates plus they reward you for keeping your balance high.

On the downside, you got to stick to the rules. If you go below the minimum account balance you could be up for high penalty fees.

Whichever type of bank account you end up choosing, each type can be beneficial for you.

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