A bank account, also known as a transaction account, is an everyday type of bank account that is usually used to pay for day-to-day expenses such as bills and groceries. Many people choose to have their salary deposited into a bank account.
When you do a bank accounts comparison, you need to know that most of these accounts earn little or no interest, so it’s common to have a linked savings account with a higher interest rate where you deposit longer-term savings.
What are the features of a transaction account?
Although transaction accounts differ depending on the account and the financial institution, there are some typical features, such as:
- A debit card – Normally, everyday accounts come with a card that you can use to make purchases, withdraw money at ATMs and shop with online. These are usually either MasterCard or Visa cards, and can be used with PayPass or PayWave to make tap-and-go purchases under $100.
- Little or no interest – Unlike savings accounts, transaction accounts usually don’t earn interest on your balance.
- Free withdrawals and transfers – Because bank accounts are intended for everyday use, you can normally withdraw money at your bank’s ATMs and selected other ATMs for free. You can also typically make transfers between accounts at no charge.
- A linked savings account – Many banks give you the option of linking your bank account to a savings account, allowing you to easily transfer money between accounts.
- Cashback offers – Some accounts come with cashback incentives for spending. These offers usually stipulate a minimum spend required to receive the cash benefit.
What are the pros and cons of an everyday bank account?
Most people need an everyday bank account for day-to-day expenses. However, when you do a bank accounts comparison, it’s useful to know the advantages and disadvantages of this type of account so you can know when to use it and when to consider other options.
- Easy to access your money – Having a linked debit card makes it simple to withdraw cash, make purchases and shop online.
- Purchase protection – Many banks offer a certain level of protection against fraudulent activities on your debit card. Some debit cards also come with extended warranty insurance, which lengthens the warranty on certain goods purchased with the card.
- Low or no fees – Many everyday accounts offer unlimited free withdrawals at specified ATMs and have no account-keeping fees.
- No interest earned – Because everyday accounts usually aren’t designed for long-term savings, most accounts don’t earn interest on the money you deposit. There are a small number of high-interest bank accounts out there, but most often the interest rate is still lower than that of a typical savings account.
- Difficult to save – Incomings and outgoings tend to be frequent with transaction accounts, so you may find it difficult to establish a stable savings plan if this is the only type of account you have.
- Overdraft fees – Many banks charge overdraft fees, so it’s important to keep an eye on your balance. Make sure you have enough money in your account to pay for purchases and cover direct debit withdrawals, such as bills.
- Overseas transaction fees – While you can use your debit card to withdraw money at overseas ATMs and make purchases online, keep in mind that most overseas transactions come with a fee.
What to consider when comparing bank accounts
If you’re thinking of opening a new bank account or switching banks, it’s worth doing a side-by-side comparison of accounts to find one that’s right for you.
Here are some questions to consider when doing a bank accounts comparison.
What are my spending habits?
Your spending habits should influence what type of bank account and features you choose. If you make a lot of transactions every month through various methods (such as at ATMs, online and in stores), you may want to find an account that offers unlimited transactions for a low or no fee.
On the other hand, if you don’t make many transactions each month, you might find that a better option for you is an account with a withdrawal limit but other benefits such as a cashback offer.
Who is the debit card issuer?
There are two main debit card issues – MasterCard and Visa – and both come with their own benefits. For example, MasterCard may offer customers access to exclusive competitions, while Visa could give customers the chance to pre-purchase concert and event tickets. Debit cards from both issuers are widely available, so it’s worth considering which benefits are most valuable to you.
What features does the account have?
It’s important to look for an account that offers you the most value and flexibility when it comes to everyday purchases and managing your money. Some common features to choose from include:
- ATM withdrawals – Most large banks have their own ATM networks, while smaller financial institutions may have partnerships with other ATM providers to offer convenient and fee-free access to cash. Check the fees and limits associated with ATM usage.
- Internet banking – Being able to access your account online and transfer money can make it easier to manage everyday expenses.
- BPAY – BPAY allows you to pay bills online using an allocated account and reference number for the payee. Some payees prefer this method of payment, so you may want to make sure it’s available before signing up for an account.
- Branch access – Some smaller banks are online only. If you need to make transactions in a branch, check that you can do so.
- Cheque books – If you need to make cheque payments, make sure you can have a cheque book attached to the account.
What are the fees?
In a competitive market, many transaction accounts come with low or no monthly fees. However, few accounts are completely fee-free. Here are some of the common fees to look out for:
- Monthly fee – An account-keeping fee charged monthly. Some banks charge no monthly fees, and some waive the fee if a minimum amount is deposited each month.
- ATM withdrawal fee – A fee for withdrawing cash at ATMs – usually waived if money is withdrawn from the bank’s own ATMs or partner ATMs.
- Overdrawing fee – A fee charged when the account has a negative balance. This occurs when the bank honours a transaction even though you don’t have enough money in your account to pay, such as when a bill payment is direct debited.
- International fees – Fees charged for withdrawing money at overseas ATMs and making transactions in an international currency. These include foreign transaction fees, foreign ATM charges, cash advance fees and cash advance interest rates.
Where to find information about bank accounts
Finding the right bank account for your circumstances takes a bit of research and planning. If you come across an account that looks appealing, make sure to read the fine print so you know exactly what you’re signing up for.
You can also use RateCity to compare bank accounts by features, fees, card type and more to find one that suits you. Above all, a bank account should make it straightforward and convenient to manage your everyday transactions.
Nick Bendel is RateCity’s property and personal finance editor, and covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Smart Property Investment, Elite Agent, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.