When it comes to personal banking, it can be hard to keep track of all the different ways you can store your money, and then choose the most competitive option.
We’ve put together the following overview to help you better understand these two account types and find one that best suits your needs.
A transaction account is your traditional, day-to-day bank account for everyday expenses. Customers typically have their salary paid directly into this type of account and use it to pay bills. Your funds are accessed with a debit or credit card, and do not typically incur a fee for ATM withdrawals or electronic transfers of funds.
What should I look for in a transaction account?
While it’s up to the customer to decide which account best suits their needs, it’s helpful to consider which features a transaction account offers. Most transaction accounts come features designed to make your everyday transactions smoother, including:
- EFTPOS facility
- ATM access
- Internet banking
- Branch access
- Cheque books
However, your lender may charge fees on some or all of these features. There are a range of zero fee options, so use our transaction account comparison tool and filter by account fees.
A savings account is a type of bank account in which the money you deposit accrues interest.
Are you daydreaming of a tropical holiday, or budgeting for your wedding? Whatever your savings goals are, a savings account is a safe and simple way to watch your money grow.
They are different to transaction accounts as they aren’t designed to be used for everyday transactions. This is because they typically carry withdrawal fees and monthly deposit requirements to encourage good savings behaviour. They do not typically come with a debit card as lenders want to discourage you from accessing this money for day-to-day expenses.
What should I look for in a savings account?
When choosing a savings account, you’ll want to look for one with some or all the following features:
- Competitive interest rate
Higher than average interest rates will put you well on the way to achieving your savings goals. A good rule of thumb is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page.
- Bonus & promotional rates
Some lenders will offer bonus and promotional rates to their customers. Bonus rates are another savings incentive that rewards you with interest on top of your interest rate for following a set of conditions. These include meeting minimum monthly deposits or a set minimum amount of withdrawals. Promotional rates are slightly different in that they are offered as a one off, higher interest rate to new customers and last a limited time, however they do not come with restrictions.
- Zero, or minimal fees
Lenders can charge a range of fees on savings accounts, including annual fees, ATM withdrawal fees and electronic transfer fees. There are many zero fee options available, so there’s no need to eat into your savings by paying them if you choose the most competitive account.
Hear from an expert
We spoke to Tim Newman, Head of Product at ING, about the differences between a transaction account and a savings account:
What about transaction accounts and savings accounts for children?
Any type of bank account is a great way to help teach kids financial literacy and give them a head start in life. You can use them as an educational tool to teach kids about income, budgeting, how to plan for a goal and overspending.
Lenders offer customers’ children a range of transaction and savings accounts, with great savings incentives. One benefit of a kid’s savings account is that they usually have a higher than average interest rate, however be wary of any additional fees that lenders charge to offset this.
It is important to note that the Australian Taxation Office imposes strict rules around children’s savings accounts to prevent tax evasion by parents putting their money in their children’s’ accounts. Check their website to read these official rules before joining with a lender.