- saving & banking
- opening a bank account
- types of bank accounts
- debit vs credit cards
- periodic transfer
- practical steps
saving & banking
- Banks allow access to the money from multiple locations, and the vast majority of accounts will generate some form of interest income. The way that banks make a profit from this model is that they will lend out the money at a higher rate than the rate they’re paying the interest income.
- There are also alternatives to storing money at a traditional bank; credit unions and building societies provide most of the same services, however the differences are that banks are run for profit, and are owned by shareholders. The other two models are not-for-profit and are owned by its members.
opening a bank account
- Banks have made applying for a bank account a simple process. This can be done in person at a local bank branch, or online.
- Basic personal details are required for them to verify your identity.
- Providing your tax file number (or TFN) can help to ensure that you avoid having interest withheld at the highest marginal tax rate.
- Each account has a unique BSB and account number. These details need to be provided to an employer to receive salaries or wages via electronic funds transfer (or EFT).
types of bank accounts
- There are four main types of bank accounts, each with slightly different characteristics designed to cater to the various needs of customers. People can, and usually do, hold more than one of these types in order to best suit their requirements. This includes the:
- Transaction account
- Savings account
- Bonus saver account
- Term deposit
- Tip: you can compare a range of bank accounts at: Finder & Money Buddy.
debit vs credit cards
- Debit cards give customers direct access to their transaction account. They can be used at cash registers, ATMs or for online payments, with money coming straight out of the account.
- For purchases made on the credit card, money will come from the bank (or credit card company) with the intention that the customer will pay back the amount at a later date, including any interest accumulated.
- These repayment schedules usually occur on a monthly cycle so that any debt at the end of a month will have to be paid off, otherwise the customer will incur interest on the outstanding balance which will be rolled into the next month.
- The interest rates on credit cards are also quite high, meaning failure to pay off credit card debt can lead to excessive financial hardship very quickly.
Have a look at your current bank account(s) and identify what account types they are. For any deposit amounts that you want to accumulate interest, hold them in an interest-bearing account (e.g. savings, bonus saver, or term deposit). For amounts you want for short-term expenses, keep in your transaction account.
Make an assessment as to whether you are getting the best deal with your bank account. It is ideal to maximise interest, and minimise fees (i.e. account fees, ATM fees). You can compare bank accounts at Money Buddy and Finder.
To help minimise paperwork, you may want to organise for your banking provider to send bank statements to your email.
If you have a bonus saver account, you may want to consider setting up a “periodic transfer” from another of your accounts, into the bonus saver. This saves you from having to remember to transfer money across to earn bonus interest.
Regularly check (e.g. once a fortnight) to see that your bank account balance(s) look normal. Unfortunately bank fraud is quite common, therefore you should make it a point to see if there have been unusual transactions that you do not recognise in your account history.
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