The difference between current and savings account
In
Malaysia, there are many, and we mean many, types of deposit accounts offered
by the banking sector. So where do we start? Usually, a person would have a
basic savings account or basic current account or both (some might refer to
these as checking accounts). But before we settle the score between these two
types of accounts, let us answer a commonly asked question regarding banks.
Can
I be sure my money is safe?
You
may not believe this, but many Malaysians are still averse to banks –
specifically, trusting the banks to keep their money safe. If you are one of
these people, who have been keeping their money under the mattress all these
years, it might be time to rethink your current financial plan.
Here’s
the short of it – your money is safe and secured. Many local and foreign banks
in Malaysia are protected by Perbadanan Insurans Deposit Malaysia (PIDM) which
insures up to RM250,000 of your savings. There are a few exceptions, such as
high risk investments like unit trusts, share trading, and gold-related
investments.
Two
peas in a pod?
Any
one individual can open one basic savings and current account per bank, while
Small and Medium Enterprises (SME) are allowed to open only one current account
per bank. Other than functioning as means to store your wealth, with these
accounts, you will have the convenience of:
- Over-The-Counter transactions
- Automatic Teller Machines (ATM)
- using your ATM/debit card
- Interbank-GIRO
- Internet Banking for bill payments
How
do you keep these accounts safe?
In other words, there are responsibilities
that you must undertake as an account holder.
- Never give out your account numbers i.e. PIN number linked to ATM/Online Banking/Phone Banking.
- In extension to rule 1, beware of phishing websites that asks you for your account details.
- Inform your bank of any changes in your contact details, address, loss of cheque, or any discrepancies in your bank statement.
Current
Account
What
is it?
A
current account is at its most basic level, a deposit account that allows you
to make payments in the form of cheques. For businesses, there needs to be
someone authorised to sign these cheques –
if there are any changes in signatories, the bank has be notified right
away. Any withdrawals from your account can be made either with an ATM card,
debit card, and even the aforementioned cheque.
Many
banks offer attractive interest rates for current accounts, but only with VERY
high levels of deposits (can be RM1 million and above). Unless you need large
sums of money readily available at any time, or want to save a large sum of
money for less than 1 month, it might be a better idea not to apply for such an
account simply for the high rate, as you may be able to get higher rates from
Savings Accounts and FDs.
Current
accounts are actually very similar to savings accounts with the exception of
allowing you to write cheques.
Savings
Account
What
is it?
A
savings account will enable you to receive interest gains on your deposits
every month, with no maturity date such as a fixed deposit investment. Like a
current account, you will be able to withdraw cash whenever you need it using
your ATM, debit, or charge card, with the absence of a cheque book. To keep
track of your account transactions and interest earnings, you can review them
via your passbook or bank account statement.
If
you are unsure how you earn your interest, here’s an example:
Hakim
opens a savings account that earns him 2.1% per year. His initial deposit is
RM5,000. In one year, he would have earned RM105 on his initial deposit.
Starting
1st January 2015, there will be an additional RM0.50 cheque processing fee (in
addition to the RM0.15 stamp duty) as set out by Bank Negara Malaysia.
Which
to get?
Both
accounts have different uses, and are often times best used together. To sum it
up, savings accounts will have accompanying ATM or Debit cards for easy access
to cash for any withdrawals and easy bill payments. However, if you absolutely
must use cheques, a current account will be the only option to provide you with
such a service.
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