What are bank accounts?

A bank account is a fund you entrust to a bank. You can add money to this fund (deposit), or take money out of it (withdraw). On the most basic level, a bank account is simply an arrangement between you and a bank. The bank will safely store your money and allow you access to it under agreed upon terms.

In today’s world, banks are more than just a secure place to sock away your money. They are a near necessity. You need a bank account in order to write cheques, use a debit card and have your salary deposited. Having a bank account also makes it easier to keep track of how you spend your money.

Types of bank accounts

Traditionally, bank accounts could be placed into one of two categories: transactional or savings. A transaction account is the bank account you use for frequent, instant access to your money. When you write a cheque or pay with a debit card, the money comes out of your transaction account. A transaction account makes it more convenient for people to conduct their financial matters and eliminates the need to rely solely on cash as a form of payment.

A savings account, as the name suggests, is a bank account where you place money you’re saving for the future. One of the major benefits of having a savings account is that you earn interest on the money you deposit into it. Often the bank places a limit on the number of withdrawals you can make from a savings account each month. Transactional accounts are for handling your day-to-day expenses. Your savings accounts are a place for extra money that you do not need instant access to.

In recent years, competition between banks for new customers has seen the lines between transaction accounts and savings account become increasingly blurry. Some banks now offer transaction accounts with relatively high interest rates, meaning you can use these accounts to save money and earn interest, yet still have everyday access to your funds should you need them. Where can I compare bank accounts online?

When you open a bank account, you are establishing a relationship with that financial institution. Trusting someone to look after your money is an important decision. You wouldn’t buy a new television without comparison shopping first. But when it comes to opening up a bank account, we tend to choose the first bank we come across without doing much meaningful research.

While all savings and transactional accounts share the same general characteristics, fees, interest rates, terms and perks vary from bank to bank. For example, do you get unlimited free ATM and online transactions each month? Do you have to pay monthly fees? The good news is that you can do your comparison shopping from the comfort of your own home, no need to even set foot in a bank.