TYPES OF BANK AC­COUNTS

Weekend Argus (Saturday Edition) - - GOODPOSTER -

Most trans­ac­tion ac­counts of­fer lit­tle or no in­ter­est, so it makes no sense to use th­ese ac­counts to save. In­vest­ment ac­counts are bet­ter for sav­ing , but be­fore you de­cide on one, un­der­stand the fea­tures of each ac­count and com­pare the rate with those of­fered by the other banks

Bank Mon­i­tor car­ries ta­bles on its web­site to help you make prod­uct com­par­isons. To view its lat­est ta­bles on sav­ings ac­counts and de­posit ac­counts go to http://ic­growth.co.za/bankmon­i­tor/

The fol­low­ing are gen­eral def­i­ni­tions, and your bank’s of­fer­ing may be slightly dif­fer­ent. Also note that, gen­er­ally, only fixed de­posits have fixed in­ter­est rates. In other words, you are guar­an­teed a cer­tain rate for the du­ra­tion of your in­vest­ment. With most other types of ac­count, the in­ter­est rate fluc­tu­ates in line with the repo rate. CALL AC­COUNT Money in a call ac­count is “on call” – mean­ing it’s not in­vested for a fixed term, and can be with­drawn at any time or at short no­tice, usu­ally not more than 24 hours. The in­ter­est rate is usu­ally vari­able, mean­ing it can change at any time. Usu­ally, the higher your bal­ance, the higher the in­ter­est earned. A min­i­mum de­posit may be re­quired to open the ac­count – any­thing from R100 to as much as R100 000. FIXED DE­POSIT AC­COUNT This is an ac­count used to in­vest for a spec­i­fied (fixed) term. Both the term and the in­ter­est rate are fixed, but the longer the term, the bet­ter the rate of in­ter­est of­fered by the bank. If, how­ever, the bank is ex­pect­ing in­ter­est rates to drop, its long-term rates won’t be that high. In­ter­est rates on fixed de­posits are gen­er­ally higher than those on de­posits in a call ac­count. If you want to with­draw your money early, you for­feit in­ter­est and/or pay penal­ties. A min­i­mum de­posit may be re­quired to open the ac­count – any­thing from R100 to R10 000. NO­TICE AC­COUNT When you place your money in a no­tice ac­count, you un­der­take to give the bank no­tice to with­draw funds be­fore you with­draw them. The no­tice pe­riod is usu­ally 30-odd days. A min­i­mum de­posit may be re­quired to open the ac­count, which may be any­thing from R100 to R50 000. Gen­er­ally, the longer the no­tice pe­riod, the higher the in­ter­est rate. MONEY MAR­KET AC­COUNT Money mar­ket ac­counts are bank ac­counts that pay in­ter­est based on cur­rent in­ter­est rates in the money mar­ket. They usu­ally at­tract a more favourable rate of in­ter­est than other ac­counts and re­quire a higher min­i­mum bal­ance. They should not be con­fused with money mar­ket funds, which are unit trust in­vest­ments. To open a money mar­ket ac­count, you usu­ally need a high min­i­mum de­posit – any­thing from R5 000 to R100 000.

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