Making your Bank Accounts Work for you

With more choices than ever, finding the right bank account can seem confusing. Thankfully, online research tools like those on the Infochoice and Cannex websites can help you make sense of what’s available.

When choosing a bank account, it is prudent to consider not only the interest rate offered, but also:

Account keeping fees and whether you are eligible for a fee exemption
Whether a minimum balance is required
Whether interest is paid on the entire account balance or only a part
How easily you can access your funds
How interest is calculated and paid (Daily? Monthly?)

Here is a quick overview of the main types of bank account and their uses and benefits.

Types of bank accounts

Bank accounts generally fall into three categories:


Transaction accounts
Transaction accounts are designed for everyday banking. Not all transaction accounts have cheque facilities, so make sure you know what you are signing up for. Some banks charge a monthly account keeping fee, which can range from $2 to $15. Some banks charge zero monthly fees, but impose service fees when you make withdrawals or when you write a cheque. You may get unlimited transactions fee-free, or the bank may limit the number of fee-free transactions you get a month. Transaction accounts generally earn low or no interest.

Savings accounts
Savings accounts generally offer higher interest rates to reward you for saving. Some even offer bonus interest to discourage you from making withdrawals.

Online bank accounts
A high-yield online account is perfect if you want higher interest rates and are comfortable having Internet-only access to funds.

A high advertised interest rate may, however, come with conditions attached. The fine print may stipulate that you have to maintain a $5000 minimum balance in a linked account before you are entitled to earn the advertised rate, otherwise you earn a lower rate.

Investment accounts
If you have excess funds and need a place to park them, consider term deposits, cash management accounts and managed funds.

Term deposits are a low-risk way to invest money that is sitting idle. Your money is locked away for a fixed period at a fixed rate. The term can be as short as one month or as long as five years. The plus is that you know exactly how much you will earn. The downside is that if you do not plan your cash flow carefully, you may find yourself having to break the term deposit.

If you have a large account balance but want easy access to your money, consider a cash management account. The minimum opening balance can be anything from $1000 to $10,000. Some banks require you to maintain a substantial minimum balance.

A managed fund lets you pool your money with other investors into a single fund that invests in assets not normally available to the average investor. For as little as $1000, you can buy into a managed fund, making it an inexpensive way to diversify your portfolio. Whether your fund makes money depends on the market performance of the assets underlying the fund.

Business bank accounts

If you are a business owner, think about the type of business you are running and how much money needs to be deposited.

Creating a new bank account

Applying for a new bank account may be as simple as clicking the “Apply” button on the bank’s website. Alternatively, you can visit a bank branch with your personal identification documents and the funds you wish to deposit.

Bank accounts for people with bad credit

What do you do if a bank turns down your application for an account?

First, find out why. Possible reasons are a bad credit rating, or lack of credit history.

A bad credit rating may result from overdue payments, bankruptcy or an adverse court judgment.

What you can do:

Obtain your credit file to see your credit rating. In Australia, you can obtain free access to your credit file from Veda Advantage.

If the information in your credit file is inaccurate or needs updating, contact the credit provider (e.g. the bank) so that they can investigate.

If you believe your details have been fraudulently used, alert the authorities.

If your credit file shows that you have an overdue account, make every effort to settle it. Unfortunately, information about overdue accounts remains on record for five years, even if you have settled the payment, and information on overdue accounts that have been cleared remain on record for seven years.

Worried that your credit rating will affect your application for a bank account?

Seek out a bank or credit union that will let you start an account without seeing your credit rating. Alternatively, consider a bank that offers second chance banking or opportunity banking to people with bad credit. The fees may be higher, but you are able to do your banking in the regular way. Whichever route you take, do your research and read the fine print before you commit yourself.

Ways to balance your account and protect your credit rating

Cut down your spending. Set up a budget that you can live with. Pay off all outstanding debts, and begin putting aside some money each month as savings.
Pay your bills on time. Avoid missing a bill payment by setting up a direct debit facility with your credit provider.
Check your bank and credit card statements carefully. Contact your credit provider if you notice anything unusual.
Always know exactly how much money you have.

With some due diligence and discipline on your part, you can ensure that your bank account works as hard as you do.