The cashier scans your goods, inserts your bank card, and asks her routine question: “Cheque or savings?” Without thinking, you answer according to your personal account.
But have you considered what each of these options really means? Do you know whether you’re banking according to your needs?
Justmoney has a look at the difference between a transactional (cheque/current) and savings account, when it’s best to make use of each, and how to choose what’s right for you.
Transactional account vs. Savings account
A transactional account is predominantly used to take care of daily expenses and manage your finances. It’s the ideal account to have your salary deposited into, from where you can then manage your expenses.
A savings account, on the other hand, is used to accrue interest on both short- and long-term savings. The portion you aim to save each month ought to be transferred from your transactional account into your various savings accounts.
According to Francois Viviers, executive of marketing and communications at Capitec Bank, most South African banks do not pay interest on current accounts and expect clients to transfer money into separate fixed or flexible savings accounts in order to receive any level of interest.
“The reality is unfortunately that most people need quick access to their money and find that the friction of investing in savings accounts is just too much,” says Viviers.
He recommends making every cent count, which includes the money in your bank – no matter how little it may be.
“One way to do this is to ensure that your main bank account allows you to grow your money instead of simply retaining it. Try to find a bank where you will earn interest which is more than the inflation rate,” he advises.
On the other hand, Viviers points out that just like any other business, banks charge their clients usage fees. In this case, it is the dreaded banking fees that can easily accumulate if you are not disciplined in how you transact throughout the month.
“R105 is the average monthly bank fee for South African banks. This works out to R1260 per annum, which is enough to pay for return flights from Johannesburg and 3 nights hotel accommodation in Cape Town within 4 years,” says Viviers.
What should you consider for each account?
Before opening a savings or transactional account, make sure you consider the following points in the below table:
Consider which features are included with each account, such as funeral cover or loyalty programmes, and enquire whether these features are included at an extra cost.
Consider the cost of the different kinds of transactions you’d like to make, add it up, and decide whether it’s within your budget.
It’s most important to select a savings account with a decent interest rate. Have a look at both the flexible and fixed interest rates. Aim for it to be above the inflation rate.
Savings accounts are also charged for ATM withdrawals and transactions. Consider these fees carefully before selecting an account.
Viviers recommends using cheaper, more convenient banking channels instead such as your card, your bank’s app or Internet banking. You save time and money and you can bank anywhere, anytime.
“Most bank apps are zero-rated for data. This means you don’t pay for the data (or need any data) to use it. Carrying less cash is also safer. If you must draw cash, do so at a supermarket till and pay the lowest withdrawal fees,” says Viviers.
Tip: You can also apply for a personal loan through your preferred bank or Justmoney.