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Transaction Accounts - December 1st
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A transaction account is an everyday account used to manage your finances. You can deposit your income, and withdraw money to spend it on the things you need in a variety of ways: debit card EFTPOS, ATMs, direct debit, Bpay, branch access, and cheques.
Transaction accounts are useful for just about everyone. Individuals can compare transaction accounts on our website. Businesses also need a good transaction account, and you can also compare business transaction accounts on our website.
Transaction statistics from the Reserve Bank of Australia (RBA) show debit card usage has reached new record highs in 2015, as we are using our contactless cards more often and fewer businesses are requiring cash payments. At the same time, people are withdrawing less cash from ATMs than at any time over the past decade.
You may not even need your debit card soon, as many banking apps and digital wallets now allow you to make contactless payment with your mobile phone. Apps available so far include Google Wallet, Samsung Pay, and Apple Pay – all encrypted with the same type of fraud detection and payment protection used on debit and credit cards.
When we know what to look for when choosing a transaction account, and stick to a realistic budget, we can do quite well for ourselves. You can make a plan today to meet your weekly and monthly needs, using our CANSTAR Budget Planner Calculator.
If you need more help in learning how to budget, head on over to our Budgeting & Saving section. You’ll find all our best hints and tips to help you survive and thrive financially.
There are a few basic things to look for in a transaction account, depending on your financial needs:
Being able to use your money in many transactions involves paying fees. Some of the more common fees you will encounter include:
Surcharges are another matter entirely. Surcharges are fees charged by the business you are purchasing the good or service from to cover the extra cost involved in processing a transaction by card rather than by cash.
If you use a contactless debit card, you might not be aware that there is a surcharge as you are quickly swiping your card and leaving the store. “Tap and go” cards including MasterCard PayPass or Visa payWave are faster, easier ways to make purchases under $100 – but keep an eye out for avoidable surcharges.
How willing are we to pay surcharges to go contactless and cashless? According to the RBA, around 60% of consumers are unwilling to pay a minimal 0.1% surcharge. The best way to avoid paying a surcharge is to pay by EFTPOS and select the ‘savings’ or ‘cheque’ option instead of using payWave or PayPass.
You might not know that you can save money while you’re spending it, with a transaction account that has an interest rate attached – a ‘savings deposit’ account. Such accounts should provide a good interest rate and standard, fee-free transaction features such as EFTPOS and ATM access, direct debit, internet banking, and branch access.
Average interest rates for transaction accounts have dropped along with savings accounts since the RBA cash rate cuts in February and May 2015. With the cash rate currently staying steady at a record low of 2.00%, you’ll have to shop around to find a good interest rate.
January, before February cash rate changes: 0.19% (av), 3.00% (max)
March, after February cash rate change: 0.18% (av), 2.75% (max)
September, after May cash rate change: 0.17% (av), 2.50% (max)
(Rates quoted are assessed on an account balance of $2,000.)
Written by: TJ Ryan
Someone who uses their debit card or account around 35 times a month on average is a High Transactor. The overall number of payments, transfers and withdrawals made in a month can quickly add up when you take into account ATMs, EFTPOS, BPAY and direct debit. High Transactors should look for an account with minimum transaction fees and low or no account-keeping fees.
Someone who is a little more measured in their banking habits, using around 10 transactions a month on average, is a Low Transactor. They need ATM, EFTPOS, BPAY and direct debit features, and may also need some branch activity. Because the Low Transactor uses their transaction account much less than the High Transactor, the account-keeping fee is a comparatively bigger cost, so they should look for an account with no account-keeping fee.
Someone who is transitioning from a child to a youth, usually from the age of 12 years old. They may have just started their first job and are looking to save, access and manage their money. Youth Transactors should look for an account with no account-keeping fee, to avoid unnecessarily eating up their small savings.
Please note that these are a general explanation of the meaning of terms used in relation to transaction accounts. Your bank or financial institution may use different terms, and you should read your product disclosure statement carefully to understand everything that may apply to your account. You cannot rely on these terms in relation to any transaction account you may purchase.
Account-keeping or administration fee: An ongoing fee charged to cover the lender’s administration costs for creating and maintaining the account. Usually charged monthly.
Annual equivalent rate (AER): A rate that can be compared between lenders. Any advertisement for a savings product that quotes an interest rate must also quote the AER so that you can compare the return you might expect over time with other products.
At call: “At call” transaction or savings accounts allow you to immediately withdraw your money from the account whenever you like.
Automatic Teller Machine (ATM): A machine found in public places, which allows you to withdraw funds from your account, usually 24/7.
Balance: The amount of money available in your transaction account.
Basis points: A unit of measurement used to describe the percentage change in interest rates or the value of a financial product. One basis point is 0.01%.
BPAY: An electronic bill payment system in Australia, where bills are paid through a financial institution’s online or telephone banking facility to registered merchants (‘billers’).
Branch: The physical building where your bank or financial institution exists. Branches are only open during normal working hours.
Cash: Money in the physical form of notes and coins.
Cheque account or checking account: A transaction account that allows you to make payments with your own money by writing cheques. If you do not have enough money in your account when the recipient cashes your cheque into their own account, the cheque will “bounce”, meaning it is not paid and you may be charged penalty fees.
Consumer: Someone who buys and uses products or services.
Debit card: A card that is linked to a transaction account and allows the cardholder to make payment transactions and ATM withdrawals. Also known as a bank card or cheque card.
Deposit: Money that you put into an account with a financial institution. (A “deposit” can also refer to a down-payment on an item you are purchasing. It is paid as a promise to purchase, with the balance of the purchase price remaining to be paid.)
Direct deposit: When a transaction is automatically removed from an account and received into a different person’s account. For example, your salary or wages are automatically removed from your employer’s bank and deposited into your bank account.
Electronic Funds Transfer at Point of Sale (EFTPOS): A payment system where you use your debit card to make payment for goods or services or withdraw cash. It usually refers to the physical machine used to process a payment in-store.
Electronic banking: A broad term used to refer to the banking system where you use online banking, telephone banking, ATMs, or EFTPOS to access your account. You can use electronic banking to make withdrawals or other payments, deposits, or transfers.
Financial Ombudsman Service (FOS): Australia’s free and independent dispute resolution service that helps consumers make complaints and resolve disputes with their banks, insurers and other financial institutions.
GST (Goods and Services Tax): The Australian tax levy on payments for goods and services.
Income: Money you earn, including wages, salary, interest, government benefits, and rental income.
Inflation: The percentage by which the price of goods and services rises each year.
Interest: An amount of ‘extra’ money that you earn by having a positive balance of money deposited into your bank account, earned over time and calculated as a percentage of the balance of your account.
Internet banking: Online banking. This can be done in an internet browser on any computer, smartphone, or tablet device that has internet access. It can also be done using an app on a smartphone or tablet.
Introductory rate: An introductory bonus offer where a variable interest rate applies to the account for a set time period. At the end of the bonus period, rates revert to the base rates.
Junior transaction account: Transaction accounts for children and youth. A parent or guardian operates the account in the child’s name until they reach legal age, but the child also has access to their account.
Pay Anyone: A payment system where you can transfer money to any individual or organisation using online or phone banking, as long as you have their account name and number.
Reserve Bank of Australia (RBA): The central government-owned institution in Australia that issues bank notes, sets the official cash rate to meet the inflation target, maintains a financial payments system, and manages Australia’s gold reserves and foreign exchange currency reserves.
Savings account: Bank accounts that pay significant interest back to the account holder and cannot be used to make transactions. Savings accounts typically have higher interest rates than transaction accounts. They can be linked to transaction accounts to make savings available as funds for transactions as needed.
Transaction: The movement of money in or out, including deposits, withdrawals, and transfers between bank accounts.
Transaction account: A deposit account where your money is available for day-to-day transactions. Provides frequent access to funds in your account for making payments through EFTPOS machines, online, ATMs and branches, and also for the use of cheques.
Withdrawal: When instructions are carried out to pay money out of your account and it is paid, e.g. when you get cash out from an ATM.
CANSTAR puts more than 350 deposit accounts from 75 different institutions under the research microscope every year.
Our five-star ratings are awarded to products that offer outstanding value in different customer profiles. To see which products received five stars, compare transaction accounts on our website or read our latest star ratings report. See how your current institution stacks up with what is available on the market, and switch if you’re not satisfied.
The below list is current to 2015. For more information on how CANSTAR rates transaction accounts, read the Methodology in our latest star ratings report.