Information on Banking

Different Bank Accounts for Different Purposes

There are basically three types of bank accounts available, although each institution will vary slightly in the products and services that they offer. These accounts are the basic bank account, the current bank account, and the savings account.

Basic Bank Account

A basic bank account requires the most minimal application process, but also provides fewer services than a current bank account. The primary purpose of these accounts is to store money for a short period of time until you must withdraw it for use.

Most basic accounts will allow you to arrange for direct deposit from an employer or government agency. These accounts also often provide services such as direct debit bill payments, but do not come with chequebooks.

One of the most convenient features of the basic account is the cash card, which allows you to withdraw cash from bank machines. You may also receive a debit card that allows you to pay directly at merchants. However, with the basic bank account your ability to make withdraws from your account is limited to the funds present at any given time. This means that your withdraw attempt may be denied if funds are low.

Although your basic account may pay interest, it is more common that it will not.

Current Bank Accounts

A current bank account provides all of the features of a basic account, but with additional services that may be useful to you. For example, a bank's current bank account may provide you with a chequebook, as well as a cheque guarantee card, which allows you to pay by cheque at a wider variety of places.

These accounts also provide both direct debit (for paying bills automatically) and debit cards for making purchases directly in a store. Another form of payment that these accounts generally offer is the standing order payment. This service allows you to set up regular payments from your account into another account of your choice. Not only is this useful when you have funds to pay to someone else, it can also be a great strategy for building savings; simply have a set amount of money moved to your savings account each month.

Many current bank accounts do pay interest to account holders, but the interest rate is usually very low.

Savings Account

A savings account is not designed to be accessed on a regular basis. For this reason, banks are able to pay higher interest on your balance because the account does not require as administrative maintenance as a current bank account does. There is a wide variety of savings account products available and usually a bank will offer a few options.

The primary ways that these accounts vary is the amount of interest that they pay, the minimum balance that you are required to maintain, and the frequency that your money will be available to you. When selecting the savings account that will best meet your needs, consider your reasons for saving and whether circumstances are likely to arise that will force you to make a withdraw early.