What’s the difference between a transaction account and a savings account?

Whether you’re interested in opening a transaction account, a savings account, or both, it’s important to understand the differences between the two.

In a nutshell, a transaction account (sometimes known as an ‘everyday account’) is used for day-to-day banking such as paying bills, shopping, and transferring or receiving funds.

Generally speaking, transaction accounts:

• Don’t pay interest. There are exceptions to this, however, such as the Great Southern Bank Everyday 50+ Account.
• Come with a linked debit card for making purchases.
• Can offer additional benefits such as refunded international card transaction fees.
• Are where most people have their salary paid into.

Savings accounts, on the other hand, are designed to grow your bank balance.

Typically, this means:

• They pay interest on your savings.
• You can’t make purchases or withdraw money directly from them (you usually need to transfer funds to a transaction account first).
• Some savings accounts offer bonus interest when certain conditions are met.

Things to consider when choosing a transaction account

While everybody’s specific needs are different, most people are going to want flexibility and convenience at the lowest possible cost.

With that in mind, here are some things to consider when choosing a transaction account.

• Fees 
  Some banks charge a monthly fee simply for having an account open with them. Others will charge for withdrawing cash from ATMs or transactions made using phone, internet, counter deposits, or eftpos. It’s worth checking because fees like this can really add up and, frankly, who wants to pay more than they need to?
• Digital banking
  A transaction account with good digital banking features should offer secure tap and pay functionality via your phone or smartwatch. It should also let you pay bills, view transactions, transfer money and check your balance 24/7. And if you’re not already on it, PayID is a safe, simple and secure way to pay and get paid using only your phone number or email address (as opposed to BSB and account number).
• Bonus interest
  Although transaction accounts generally don’t pay interest, some unlock exceptionally good rates when used in conjunction with a linked savings account. For example, linking a Great Southern Bank Everyday Edge Account to a Great Southern Bank Home Saver Account can earn you a special interest rate on your savings account if you deposit $2000 or more and make five Visa Debit card purchases each month.
• Other features
  While we’re on the subject of savings, a feature like The Boost can help you save by automatically transferring a set amount from your transaction account to your savings account every time you use your Visa Debit card. On average, our customers have saved an extra $2,000 a year by setting up a $2 boost on their Great Southern Bank Everyday Account and making three transactions a day.

Things to consider when choosing a savings account

While the purpose of savings and transaction accounts is different, the key attributes of flexibility, convenience and cost still apply. Here’s what to look for in a savings account.

• Interest rate
  Given that the point of a savings account is to grow your savings, the interest rate is clearly going to be an important factor. Don’t forget to check whether a bonus rate applies when certain conditions are met (see above).

• Fees
  As with transaction accounts, some banks charge a monthly fee simply for being a customer. And while not a fee exactly, you may end up forfeiting your interest if you make withdrawals. Neither applies to Great Southern Bank Savings Accounts.

• Savings tools
  Sure, you can successfully save by regularly transferring money to a savings account. But you can reach your goals faster by using clever tools like The Boost (see above) and The Vault. You see, the thing about human beings is that we’re impulsive creatures. And when you’ve got a nice little nest egg building, you only need to give in to temptation once to ruin all your hard work. The Vault keeps your savings hidden to reduce the chances of this happening. However, unlike, say, a term deposit, you can still access your funds if you need them in a hurry.

Which should you go for?

Hopefully by now you should have a clearer idea of the difference between transaction and savings accounts. As for which best suits your needs, only you will know the answer. But, as you’ll have seen, the smartest solution is often combining the two, particularly when doing so unlocks extra benefits such as bonus interest.