When you press the "savings” account button at the ATM or in-store at the eftpos point of sale, you are actually withdrawing money from your everyday transaction banking account. Your actual savings account, the one you use for saving money, is something different again.

What is a transaction account?

A transaction account is the bank account that you'll use pretty much every day, whereas you may only interact with your savings account once or twice a month. Your salary goes into your transaction account and you pay your bills from it by direct debit. Your transaction account gives you constant access to your money. You'll be able to make transfers to other accounts, either online or over the phone, you can withdraw money from the account at an ATM and you won't usually face a fee for these functions.

What features should a good transaction account have?

Of course, every person has slightly different requirements when they're looking for transaction accounts, but you should look for features that make life easier. When you're comparing transaction accounts, you should look for things like:

  • An EFTPOS facility
  • Internet banking
  • Easy branch access
  • Payment apps like Apple Pay
  • Widespread (and preferably free) ATM access and usage, and
  • BPAY.

Some banks might charge fees on some of these facilities and features, so it's worth your while to use an account fee filter when you're comparing accounts.

You can research and compare transaction banking accounts in Australia here.

What is a savings account?

A savings account is an account in which you deposit money and then, essentially, forget about it! The purpose of a savings account is to save money by leaving it in place so that compound interest can grow it. Find out how much interest you could earn using our compound interest calculator. As you might have worked out, a savings account with high interest rates is better than one with a lower rate.

A savings account is a relatively safe place for your money to sit and grow, it's steady and your money is protected by the government for up to $250,000 as long as you've used an authorised bank or credit union.

Savings accounts are not for everyday use

Savings accounts differ from transaction accounts because they're not to be used for regular transactions. You don't use them to pay bills, or to receive your salary, for example. Most savings accounts impose fees for any withdrawals that you may make and some have minimum monthly deposit requirements so that you maintain good savings habits.

Generally, you won't have a debit card or chequebook either, because your bank wants to make it awkward for you to use the money for everyday expenses. Of course, if you need to withdraw the money earlier than you planned, you'll be able to, but you may have to wear a penalty, like lost interest for that month.

You will have to link your savings account to a transaction account in order to move money in and out. You can research and compare savings accounts from Australia's major banks, credit unions and building societies here.

What features should a good savings account have?

You shouldn't pick just any old savings account; you should compare the market offerings very carefully so that you choose the best one for you and your plans. Make sure that you look for and compare these following features. You don't need to choose a savings account at the same bank or credit union where you hold a transaction account.

A competitive interest rate

This is probably the most important feature of all, as it determines how rapidly your money will grow (which is, after all, the entire point!). When you're looking for a savings account compare interest rates and focus on ones that are higher than the CPI rate. This rate is always changing, though, so keep up with it by consulting the Reserve Bank of Australia.

Introductory or bonus interest rates

Your savings account best rate offering may be when you first open it. Some banks offer an introductory or promotional rate for a set period, so that your money attracts more interest for the first 12 months or so. It's important to find out what the rate reverts to after this period ends, though, as it may not be as good as others. You can sometimes "surf” to a new, higher interest savings account so that you're always in a promotional period.

You may also receive a bonus rate for good behaviour. If you maintain your monthly minimum deposits and don't make any withdrawals for a stipulated period, your interest rate might get a slight bump.

It's also worth asking your transaction account provider if you'll get a higher interest rate by opening one of their savings products. You may also get a better rate if you link your transaction and savings accounts together so that you "sweep” money across regularly.

Low or zero account fees

Don't put up with fees on a saving account! Banks often have a schedule of fees and charges when it comes to transaction accounts but your saving account should be fee-free.

There are plenty of savings accounts out there that don't have any fees, or that allow you to make, for example, two withdrawals a year for free, so do look out for this.

You can research and compare transaction banking accounts in Australia here.

Compare savings accounts from Australia's major banks, credit unions and building societies here.

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.