Find out which type of bank account is right for you. Save time and money with tips from the experts
Choosing the proper bank account can be a daunting task. There are so many options, and it is not always clear how they differ from one another. However, you do not want to waste time on an account that does not provide you with the services or features that best meet your needs. The following guide helps you to narrow down what your needs are so you can select the best bank account for your budget and lifestyle.
Different Types of Bank Accounts Available
It is easy to become overwhelmed with the different financial products on offer these days. So before you invest your money in anything, take some time and think about what type of account will work for you best, whether this means a saving or spending mindset.
There are five main types of bank accounts, so decide which one suits your lifestyle as it is now. That way if life gets tough later down the line, having an option ready can save precious dollars and minutes every day.
A checking account is the best way to keep your money safe and sound without any risk. They come with all you need, including a debit card. This makes writing checks or making purchases on the go an easy experience. But there are drawbacks, too. Overdraft fees can be pretty hefty if you are not careful about your spending. Checking accounts do not earn interest for the amount you have in it as well.
Savings accounts do allow you to earn interest on the money in your account, but you typically do not get an ATM card or checks. In many instances there are only six withdrawals per month. Savings accounts, depending on your selected banking institution, come in a wide range of offerings, with each offering additional perks such as free notary services, rewards for keeping a minimum balance, and no-charge cashier’s checks.
Money Market Account
Money market accounts are the same as a savings/checking account hybrid. You get all the benefits that come with having both, like being able to write checks and use your debit card. In addition, you also earn competitive interest rates just like you would from a regular savings account. The downsides? Money Market accounts typically have withdrawal limits similar in size or larger than regular checking accounts (6 withdrawals per month), and they may require deposits over $500 to start.
Certificate of Deposit
CDs (Certificate of Deposit) are a great way to grow your money without taking risks with the stock market. With CDs, you get fixed interest rates that do not change even if interest rates drop. This is because the interest rates are set once you invest, and remain that way until maturity. Maturity is when you are able to draw it out, or cash it in.
However, where CDs are concerned, you cannot withdraw the money before it matures without paying a penalty. Each bank and financial institution that offers certificates of deposit have their own rules regarding what those penalties are, but in general it is a percentage of the CD’s value that is retained for early withdrawal.
Compare CD rates by term length HERE.
There are a lot of retirement accounts, such as 401(k)s and Traditional IRAs. Depending on the plan you use, there may be tax breaks for individuals who contribute money into these plans, with each having its advantages. But what about when you need to access your funds early? Unfortunately, penalties apply if specific rules are not followed with these types of retirement accounts. It is well worth the time to sit down with your banker and allow them to guide you toward those retirement banking accounts that best meet your future needs.
Pros and Cons of Bank Accounts
Checking account advantages
With checking accounts you have access to online and mobile banking ATMs. You can also use debit cards or checks for purchases, as well as having the option of direct deposit. Most checking accounts do not charge yearly fees simply for having them.
Checking Account Disadvantages
While most checking accounts do not charge a yearly fee, they do often charge monthly maintenance fees. If you use your ATM card at a third party machine, then you are charged another fee. When you are shopping around for the best bank account, make sure to ask if there is a fee charged that is based on the balance of money. Some banks charge you a “maintenance fee” if you do not keep a certain amount in the account at all times. Not all banks do this, which is why it is a very important question to ask when comparing banks.
Saving Account Advantages
There are many advantages to saving accounts. They are ideal for individuals who want the safety and security of knowing their money is safe. Savings accounts offer some small interest for balances left within the account. If you are using the account to save for a trip or a large purchase, this could be the ideal financial account for accomplishing that goal.
Saving Account Disadvantages
While saving money and earning interest does happen with a savings account, the low interest rate means that the amount of money added to the balance is miniscule at best. Additionally, you are limited to only six withdrawals a month, so if something goes awry you may not have access to your funds when you need them.
Best National Banks
Some of the best national banks are available across Australia and offer features like sign-up bonuses and strong interest rates. Some have brick and mortar locations, while others are only online. Here is a list of the most popular banks in Australia to get you started.
Best for online banking, BOQ is a good option for those who do not have time to visit the bank or want an easy way to make payments. Their mobile app is robust and they offer online banking with many different features. BOQ also has a high rating for customer service. Their interest rates on savings accounts is moderate, however. Additionally, the overdraft fees are significant and they can charge that fee up to four times on just one overdraft. They do not offer a good CD rate of return. If you are someone who does not typically keep a small cushion in your account, this may not be the bank for you. However, if you are fairly responsible with your cash flow and like having quick access via your phone or other devices, this is a good choice.
MyState Bank is the best place to get cashback with qualifying purchases with your debit card each month. Their savings account also offers a good rate of return compared to others. The downside is that they do not accept any cash deposits, and you would be hard put to find a physical branch location. Their CD rates are ranked highly as is the banking experience and customer service.
The best place to get a sign-up bonus is at Macquarie. Additionally, JPMorgan Chase is considered one of the largest banking groups in Australia. This means they offer more than just a savings or checking account. If you are someone who likes to keep everything in one place, then this may be the bank for you since Chase also offers auto loans, mortgages and credit cards. There are a wide assortment of both brick and mortar banks as well as online access.