Most people don’t put a lot of thought into their everyday bank account. That is a shame, because comparing the cheapest bank accounts can be a handy way to find a bank account which minimises unnecessary fees and charges, while qualifying for a range of perks and extras.
We’re going to look at the different types of everyday transaction accounts available, what distinguishes these bank accounts from other options and the sort of things you should be looking for when comparing bank accounts.
What type of bank accounts are available?
- Transaction accounts – These bank accounts are designed to make meeting day-to-day expenses easy. Transaction accounts are set up to make it easy for people to receive their pay, take out cash and pay any bills that have arrived. While these bank accounts are highly accessible, they generally don’t offer a great interest rate return and sometimes have numerous bank account fees and charges that the account holder should be wary of.
- Savings accounts – On the other end of the spectrum you’ve got savings accounts, which are designed to give people a place where they can put their money and make it grow faster. Savings accounts typically offer a superior interest rate to regular transaction accounts, and some have measures in place that make it harder to access your money, theoretically making it easier to set your funds aside and save.
- Joint bank accounts – This is a bank account that has two names on it, and is an account that is generally opened by people in a relationship. There are advantages to opening joint bank accounts, like lowering account fees, but there are also inherent risks involved.
What are the advantages of a transaction account?
When you’re testing the market, and comparing the cheapest bank accounts to find the best option, it’s useful to be aware of the advantages an everyday transaction account offers for users.
- Easy-to-use and accessible – Perhaps the chief advantage of an everyday transaction account is the fact that it’s easy to use, and highly accessible. If you’ve got a bill to pay or need a place where you can receive your wages, a regular transaction account generally gets the job done, making it easy to manage your money and meet day-to-day expenses.
- They’re often free to open – Rules change from provider to provider, but most everyday bank accounts are free to open. This allows you to get started with your new bank account, without having to worry about being slugged with fees straight off the bat.
- No lock-in period – Most people don’t shop around for the cheapest bank account, but it’s easier than you might think. Many institutions offer bank accounts with no lock-in periods, which can be useful for people looking to shop around for a better deal.
- Your money is safe – A bank account is one of the safest places to keep your money. Should the unthinkable happen and the financial institution you’re banking with somehow goes bust, the Australian government will guarantee your savings account balance up to the value of $250,000, which can provide some peace of mind in times of volatility.
What are the disadvantages of a transaction account?
When you’re comparing the cheapest bank accounts and looking to find the right one for your situation, it’s equally as important to be aware of the disadvantages of a transaction account.
- Interest rates are variable – While they take some guidance from the Reserve Bank of Australia (RBA), banks and financial institutions are free to change their interest rates whenever they like. This could cause problems for people who want a bank account that can give them the potential to grow their money, while managing their day-to-day expenses.
- Interest rates are lower than savings accounts – What’s also true is that interest rates offered by traditional transaction accounts are generally lower than those offered by savings accounts. So even if you have found the cheapest bank account available, that doesn’t necessarily mean you’re in a good position to grow and expand your wealth.
- Paying multiple fees – Another one of the main sticking points that comes with people opening transaction bank accounts is the fees payable. While the nature and amount of these fees vary from provider to provider, bank account holders can often lose a significant portion of their savings paying fees that in some cases they’re not even aware of.
- Temptation to spend – Having money that’s easily accessible is convenient, but it can also be very tempting. The ease with which transaction bank account holders can access their funds can sometimes result in people making unnecessary discretionary purchases, which over the course of time can make it more difficult for savers to meet their long-term financial goals.
What sort of fees will I have to pay with a transaction account?
If you’re comparing the market, and looking to find the cheapest banking account in Australia, it’s important to be wary of the sort of fees these bank accounts commonly put upon customers:
- Monthly account-keeping fees – These are fees charged by your bank or financial institution that are designed to cover the day-to-day administration and upkeep of your account.
- Phone banking fees – If you’re someone who likes to bank over the phone, your use of this banking feature might incur an additional level of fee from your provider.
- Internet banking fees – By the same token, if you’re undertaking internet banking, you may be incurring additional charges from your bank or financial institute.
- Overdraft charges – Some banks and financial institutions will penalise account holders for overdrawing on their bank account balance. It’s always important to be aware of your bank’s policy on overdrafts, and whether they impose additional charges when this occurs.
- Transaction fees – Depending on your provider and the nature of the transaction you wish to undertake, you may also incur separate transaction fees you have to pay. Again, it’s important to be aware of your bank’s policy when comparing bank accounts.
What should I look for when choosing a transaction account?
When you’re comparing cheapest bank accounts in Australia and looking for the right one that fits your situation, it’s important to consider the following aspects and traits.
- Are the fees low? Bank accounts with low fees generally ensure that the bank account holder has more money at the end of the day. Make sure you compare bank accounts by fees, to make sure you’re not needlessly digging into the money you’ve saved to cover unnecessary charges.
- Does your bank have minimum and maximum account balances? Be wary if your bank imposes charges for going under or over any minimum or maximum balances.
- What sort of access does it offer? When comparing transaction accounts, it’s important to be aware of the different levels of access offered, to make sure you’ve got the right bank account to meet your day-to-day expenses, while keeping your funds safe.