Money

Banking 101: different bank accounts explained

The first step towards financial wellbeing is depositing your money wisely.

If you've had the same bank account since your first job, chances are you've never given it a second thought.
The right account will help you reach your savings goals, so it pays to regularly review your banking needs to see if your account still meets them.
Here's what you need to know:

Paying bills and accessing cash:

Transaction accounts or everyday accounts won't usually earn you any interest. This type of account is designed to meet your day-to-day banking needs, provide a place to deposit your pay and an account to pay bills, as well as giving you easy access to your cash.
Make sure your bank is competitive, though, and allows unlimited transactions for no monthly fee.

Saving for a purchase:

If you've come to the conclusion that your only hope of getting into the property market is by appearing on The Block, it might be time to start squirrelling away a few dollars.
The secret is an account that restricts the way you spend. Some savings accounts help you save by rapping you on the knuckles with a fee when you exceed the withdrawals-per-month limit.
Others offer bonus interest as an incentive not to touch your cash, provided you meet certain requirements such as depositing a minimum amount or not making any withdrawals over a set period.
If you have several projects on the burner, most banks will let you open more than one savings account to help you budget.

Growing your nest egg:

With a term deposit account, a lump sum of your money is held for a specific period of time — usually from one month to five years — at a fixed interest rate. The amount of interest earned on these accounts will depend on the term and the applicable interest rate.
The good thing about term deposits is that you'll know ahead of time exactly what interest will be paid on the deposit. But to see the results you'll need to exercise willpower with this one because fees may apply if you withdraw your funds before the term has matured.

Whittling away your mortgage:

An offset account is a transaction account that's linked to a standard variable home loan.
"There are a number of key benefits associated with this particular feature, specifically saving you interest charges and paying off your home loan sooner," says Dimitra Dinos, General Manager CommBank.
"One hundred per cent of the money in your offset account is deducted from your home loan balance before interest is charged. As a result, the more money you have in your offset account the less interest you'll pay on your home loan.
"While there are several benefits associated with an offset account, there are also several considerations borrowers should take into account. We always recommend speaking to your local home lending specialist before making any decisions to ensure an offset is the best option for your needs."
To help improve your financial wellbeing, please visit financiallyfitfemales.com.au. Proud partner, CommBank. Always consider your personal circumstances before acting on financial advice