TYPES OF BANK ACCOUNTS
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 CALL ACCOUNT Money in a call account is “on call” – meaning it’s not invested for a fixed term, and can be withdrawn at any time or at short notice, usually not more than 24 hours.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.