Savings and transaction accounts are designed for two different purposes, but in a world of online banking it can sometimes be hard to distinguish the differences between the two. The easiset way to think of it is with the name. Transaction means incurring an expense, it's where you spend your money. Savings account is where you hold onto it, deposit funds and accrue interest.
What is a transaction account?
A transaction account is a fund you use for day-to-day purchases. These bank accounts give you easy access to your funds and come with debit cards, which can be used for purchases at bricks-and-mortar stores, online shopping and withdrawing money from ATMs. Accounts allow you to set up direct debits and pay bills. You can open a transaction account whether you’re a business owner, child, student, pensioner or anyone in between. Because these accounts give you free rein over your cash, you’ll earn little to no interest on your balance.
What is a savings account?
A savings account is an interest-bearing fund which gives you a safe place to store money you’re not using. Accounts also come in many shapes and sizes with options fitting various savings goals, such as term deposits and online savings accounts. These accounts make access to your money a bit tougher, often by imposing account requirements tied to earning a bonus high interest rate. The way interest is calculated on a savings account involves using a percentage rate against your balance. This interest is generally accrued daily on a standard savings account and paid monthly.
What are the key differences between these accounts?
Interest
Among the many advantages of a savings account is that you can earn a modest return on your money compared to a transaction account, where you likely won’t earn anything back. The better your interest rate and the longer you save, the more you’ll earn on your balance. For example, if you deposited $1,000 every month in an account earning 1% p.a. over five years, you’d earn $1,499 in interest. However, if your rate was 2% p.a., your interest return more than doubles to $3,047 over the same period. Comparing with Savvy will allow you to find the best interest rate to grow your savings. You can use our savings calculator to simulate how much interest you could earn.
Withdrawals
Everyday bank accounts give you the freedom of 24/7 access to your funds, including being able to pay bills via BPAY. Savings accounts, on the other hand, often lack the same freedom. You could lose any interest earned for the month or have to pay fees if you withdraw more than your institution’s limit. Some banks give you the option of a locked savings account to restrict access to your cash until your term has matured. Financial institutions will often require you to open a linked everyday account where you can transfer funds for spending.
ATM access
When you open a transaction account, you’re given an access card which can be used to withdraw money from ATMs. A savings account won’t come with a debit card unless you link it to a new or current everyday account, meaning you won’t be able to make direct purchases from that account beyond transferring your funds to another.
Bonuses and special offers
Some savings accounts offer bonuses for meeting minimum monthly account requirements. By meeting balance, deposit and withdrawal conditions, you can earn a high bonus interest rate of up to ten times your standard rate or more. Banks also offer introductory rates which give account holders high interest for up to six months before reverting to a much lower rate. By comparison, transaction accounts can reward you with cashback offers, frequent flyer points and discounts on restaurants and popular brands.
Fees
Transaction and savings accounts have a similar fee structure, with monthly account fees of up to $5 across both funds. These fees can be waived if you meet account conditions such as minimum deposits or spending, depending on the account you open.
Compare savings accounts
Are you looking to grow your savings? Compare a wide range of savings accounts with Savvy so you find the best deal in Australia and the highest interest rate to help grow your savings. Â
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Disclaimer: Savvy is not advising or recommending any particular product to you. We provide general information on products for the purposes of comparison, but your personal situation or goals are not considered here. Although we try to make our comparisons as thorough as possible, we do not have information on all products on the market on our site.
You should always consult a given offer's PDS or further documentation in the process of deciding on which loan to choose, as well as seeking independent, professional advice. If you decide to apply with one of the lenders listed above via our website, you will not be dealing with Savvy; any applications or enquiries will be conducted directly with the lender offering that product.
Top tips for choosing which account to open
Frequently asked bank account questions
Should I have my transaction and savings account with the same institution?
Using the same bank for your everyday account and savings account can reduce the time it takes to process money. Most bank transfers are instant if you’re transferring within the same institution. However, you may find a cheaper account with fewer fees and a better interest rate at another bank, which could save you money. In many cases, though, you can benefit from having two accounts with the same institution, as many banks will offer benefits such as fee waivers when you do so.
Are the eligibility criteria different for savings and transaction accounts?
No – you must be over 14 years old and an Australian resident to open both types of accounts on your own, although accounts can be opened for you in conjunction with your parents much earlier. You’ll also need to supply two forms of photo ID, which can include a driver’s licence or passport.
How do I know my money is safe in a savings account?
The federal government guarantees bank balances up to $250,000 in the event your financial institution collapses. This protection is provided through the Financial Claims Scheme, which was created in 2008.
Can I get a joint transaction or savings account?
Yes – you can open a joint transaction or savings account. It’s a popular form of banking for couples who have equal expenses or a shared savings goal. Having two people contributing to one account may also be easier to meet monthly requirements, such as minimum deposits and balances, to earn a high bonus interest rate. These come with the option of ‘one to sign’ or ‘both to sign’ protections. ‘One to sign’ means any account holder can withdraw funds and make changes, whereas ‘both to sign’ means you both need to approve any modifications or spending.
Our Savings Calculators
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