South Africa is home to various types of banking institutions. These include locally controlled, mutual, cooperative, international and foreign banks. Banks in South Africa hold a total of around R6 trillion in deposits. Therefore, to reap maximum benefit from the banking industry, it is important to understand the different types of bank accounts in South Africa.
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Different types of bank accounts serve different needs. Therefore, it is wise to put money into the best account type for your financial goals, so you get access to the right tools for spending and saving. Doing so allows you to maximize the return from your bank, minimize fees, and manage your money conveniently.
Types of bank accounts in South Africa
Before you open a bank account, it is important to understand the different types available so you can choose one with benefits and services that match your daily needs. Here is a detailed guide on the different bank account types in South Africa:
1. Checking accounts
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They are readily available at low monthly fees, but you have to pay additional charges while withdrawing money or making other transactions. You can apply for an overdraft. Some of the key features to look out for include:
- No minimum balance is required to set up or maintain
- Direct deposit
- Online banking via the website
2. Savings and investment
A saving and investment account is one of the best African bank account types. Just like the name suggests, it allows you to save up the money you don't need right away. Although this type offers average interest rates, it comes in handy for people who want to:
- Budget better
- Build up their saving muscle
- Store excess cash
Some of the important features to look for in a savings and investment account are:
- No monthly maintenance fee
- Online access and checking
- A competitive interest rate
3. Money market accounts (MMAs)
Money market accounts (MMAs) are among the different types of bank accounts commonly used by South Africans. It is a combination of features from the savings and checking types. It is one of the best options for a person who wants to store a 3-6 month emergency fund. The money is close for whenever you need it but out of your daily checking.
This type offers:
- Earning interest on balances
- Debit-card access
Unlike others, the money market account often earns more interest than the regular savings type.
4. Certificate of deposit (CDs)
CDs are one of the less used bank accounts in South Africa. It serves as a savings account that holds your money for a fixed period from three months to five years. To reap maximum interest for your savings, you must commit to keeping your money in it until the agreed maturity date.
This type of bank account is best for saving for financial goals with a planned end date. However, if you opt to withdraw your funds before the maturity date, you will have to pay the penalty. In most cases, the penalty can wipe off everything you have accumulated. In other cases, the penalty might even eat away the amount you deposited initially.
Just like the name suggests, a retirement account is where people save money to spend during their retirement. They make it easier to save by easing your tax burden and might result in larger account balances in the long term.
Most banks in South Africa offer:
- Individual retirement (IRAs)
- Retirement for small businesses
A brokerage type is a taxable account with money you can funnel towards stocks, bonds and mutual funds. The highly recommended and frequently used type is the growth stock mutual funds with a long history of solid returns.
Some of the benefits include:
- Spreading risks across different companies
- Avoid the risk that comes from investing in single stocks
- What is a transmission bank account? It functions like the savings and it is used for everyday transactions such as paying or withdrawing money.
- What are the 4 types of bank accounts? They are savings and investment, checking, money market, certificate of deposit and retirement.
- What are the two basic types of bank accounts? The two basic and commonly used types are savings and investment and checking.
- Which type of bank account earns the most money? The retirement type that are invested in a variety of stocks and bonds offer higher returns. However, CDs, MMAs, and high-yield savings will yield more for short-term growth.
- How many different types of accounts can a person set up at the bank? The number you need depends on your financial situation and goals. There is no limit to the number you can open.
Banks offer convenience, safety and security for your money. Whether you bank online or prefer a traditional bank or credit union, there are numerous types of bank accounts in South Africa from which to choose depending on your personal preference and goals.
Briefly.co.za shared an interesting article about South Africa bank charges and fees guide 2021. South Africa's banking sector is one of the most vibrant in the southern region of Africa. The transaction rates also vary from one financial institution to the other.
Financial institutions charge different amounts for various purposes. The bank charges differ depending on the nature of the transaction and the amount of money transacted. The rates also vary from one financial institution to the other.
Source: Briefly News