In the same way you might shop around for the best price on a car or a TV, comparing bank accounts can be a good way to find one that helps minimise unnecessary fees and charges, while possibly making you eligible for some helpful extras.
So let’s look at what’s available and help you find the cheapest way to get what you need from your account.
What are the most common types of bank account?
Among the most common types of account offered by financial institutions (and the ones we’re focusing on here) are:
- Bank accounts – Also known as transaction accounts, these are designed to assist you with your day-to-day needs, like getting your salary, withdrawing cash and paying bills. However, while they are very accessible, they usually don’t offer much of an interest rate return and may have various fees and charges that can eat into your money.
- Savings accounts – These are designed so you can store your money and let it work for you. They usually offer a better interest rate than bank accounts, and, in the case of term deposits, may not let you access your money for a fixed period.
What’s good and bad about bank accounts?
Glad you asked! The best bank account for you will depend on your own specific needs, but here are a few basic starting points to consider:
- Easy-to-use – An easily accessible account for money coming in (i.e. wages) and going out (e.g. bills), making it simpler to manage your money.
- Usually no starting fees – Most everyday bank accounts are free to open and don’t need a minimum starting balance.
- Security – Accounts at authorised deposit-taking institutions of up to $250,000 are guaranteed by the government. So if you have $250,000 with one institution and $250,000 with another, then both deposits are guaranteed. However, if you have more than $250,000 with one institution, then only the first $250,000 is guaranteed.
- Interest rates can vary – Banks and financial institutions are free to charge whatever interest rates they like, regardless of the official cash rate set by the Reserve Bank. So keep an eye on which institutions are being competitive.
- Lower interest than other accounts – Generally, a bank account won’t give you as high an interest rate as savings or term deposit accounts, though they offer other advantages.
- Fees – You might be charged fees if your balance falls below a certain amount or if you use ATMs owned by a rival bank. Check with the financial institution what fees will be charged on the account.
What fees should I avoid?
When you’re looking for a cheap bank account, there are some fees it’s better not to get stuck with if possible, like:
- ATM fees – Some banks will charge you a fee to access their own ATM once you pass a certain number of transactions. Others may charge you a fee for accessing ATMs owned by other banks.
- EFTPOS transaction fee – Some banks will charge transaction fees for using EFTPOS facilities once you pass a certain number of transactions.
- Branch assistance fee – Due to the rise in internet and phone banking, a number of banks now charge a fee to make transactions over the counter at branches.
- Account overdrawn fee – If you spend more money than is in your account, you may be charged an overdrawn (or overdraft) fee.
Of course, you may decide that some fees are worth accepting to get the type of bank account that best suits your spending and saving habits. So compare bank accounts to find one that is the best fit.
What factors should I look for when choosing a bank account?
We’ve looked at the possible negatives to avoid, so what are some positives to look for? Here are a few basic things that might suit you, depending on your particular financial needs:
- High interest rates – Of course you want the best rate for your money, but be careful of banks or financial institutions that offer high introductory rates that revert to lower rates after a certain period.
- Low account-keeping fees – Low is good, none is better.
- Access to suit your spending habits – Do you need an actual branch to visit? Are you comfortable doing your banking online?
- Free ATM withdrawals – Check fees both for your own ATMs and those of other banks when you use them.
- Minimum or maximum deposit amounts – These can become important if there are fees attached to how much is in your account.
The important thing with any comparison shopping is to find the account that suits your own needs, so think about what kind of saver and spender you are.