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Sometimes we look back to our early years and wish we’d done things a little differently. Particularly, the way we managed our finances, it could be because we have not had access to the right financial information.
At Standard Chartered, we’re committed in providing you with the right financial tips and tools. Introducing “Basics of Banking Series” – an educational theme about banking solutions that will help you plan for your goals and make informed decisions.
Today, let’s take a closer look at Deposit Accounts and why it’s a popular financial instrument.
How each Deposit Account is tailored to ones needs
There are three mostly used types of deposit accounts. Current Account form the basis of most individuals’ banking arrangements, being the account that is used for cash deposits, daily purchases, or withdrawals. It doesn’t have a lock in period, and it gives you access to your money when you need it. Current accounts can be opened in UAE dirham or foreign currencies depending on the bank’s offering. Normally, this account comes with a cheque book and a debit card.
Debit cards are directly linked to your account and can be used for payments, purchases online, locally, and internationally where the amount gets directly debited from your account. Debit cards can also be used to withdraw money from Automated Teller Machines (ATMs) both locally and internationally. Please note that most banks charge a fee if money is withdrawn using other bank ATMs. This fee is AED 2 for local withdrawals for most banks in the UAE. Debit cards is among the safest ways to transact. Unlike credit cards, there is no interest charges, and it does not affect your credit score. It allows you to safely make payments on different channels including mobile wallets. You can easily and securely add your debit card to your mobile wallet such as Apple Pay, Google Pay, and Samsung Pay to pay within seconds. You can use your mobile wallet to pay for both online and in-store purchases. If you prefer to use your physical debit card, the process remains simple. Upon checkout, you can just swipe your card using the Point of Sales (POS) machines present at the store. Today, most banks offer contactless debit cards allowing you to simply tap your card and pay within seconds.
Cheque is an instrument used to direct the bank to pay a predetermined amount to the payee. You need a current bank account in order to issue a cheque. Most banks in the UAE offer the first cheque book for free upon account opening. You may have to pay a fee for each cheque book thereafter. One of the advantages of using cheques is that there is no limit for the amount in case you plan on making large payments. Additionally, with post-dated cheques, you don’t have to immediately pay the amount. It gives you the option to make the payment at a specified date in the future.
A similar, but safer, way to make large payment is through cashier orders. When you request for a cashier order, the amount is immediately drawn from your account and transferred into the bank’s own account until it is withdrawn by the payee. This makes it a more secure instrument compared to cheques.
Clients can transfer money from their accounts locally and internationally at the rates applicable during the time of processing. Requests can be raised through the different channels offered by banks. Additionally, most banks offer standing instructions allowing you to give the bank instructions to debit chosen accounts to make payments by specific dates. Those requests can be done in branches or online depending on your bank and may incur a charge.
Today, most banks offer both local and foreign currency accounts. The biggest advantage of having a foreign currency account is that it protects you from the short-term currency fluctuations. Once you open a foreign currency account, it allows you to transfer money and transact in the foreign currency while avoiding currency conversion fees.
Consumers who prefer to grow their money use Savings Accounts as it yields competitive rate of interest or profit, and some banks offer extra rewards for saving more. Fixed or term deposit accounts, on the other hand, lock up money for a set term between 1 to 24 months at a fixed interest rate or profit rate. There are certain conditions that may be tied with such accounts, such as maximum or pre-mature withdrawals that will result in losing interest or profit.
Many banks provide a debit card with saving accounts. However, cheque books are not offered as it is not a transactional account.
Savings accounts and fixed deposits are among the safest ways to gradually grow your money. It’s important to choose the products that will fit your lifestyle and help you reach your savings goals.
Things to watch out for in using Deposit Accounts
Having a banking account comes with financial freedom however, it is important that you know the basic responsibilities in order to avoid unnecessary costs.
Be aware of your bank’s fees:
when you use a debit card abroad, always use the foreign currency to avoid additional fees set by the merchant and standard foreign transaction charges. Additionally, know that Deposit Accounts requires you to maintain a minimum balance and it’s important to think how you’ll use it and find out the balance requirements of each bank to avoid fees. You need to be aware of the bank’s full list of fees and charges and carefully review them before selecting a product. The service and price guide of each bank can be accessed through the bank’s official website. Each bank has its own unique offerings, hence it is important to research and compare fees and offerings to find what best suits you and your needs.
Understand the risks that might be associated with your product:
When issuing cheques, be aware that there are risks associated with issuing cheques, hence it’s important that you maintain the amount committed or make sure that you do not miss your due dates to avoid penalties. Bounced cheques can dent your financial credit history.
Ways to manage your Deposit Accounts
Opening an account is facilitated via branches, through Relationship Managers, or for some banks via digital banking apps. Once you’ve opened an account, managing it is a key step towards financial health. Today, banks offer free and secure apps that can help you keep track of your finances at a glance either via your mobile or through a desktop computer. Some banks offer lower fees and special offers for requests raised online or through their app. Once your account is open it provides you access to pay your bills, transfer money to others, use your debit card, and issue cheques while having access to an online banking platform.
Banks offer various channels allowing you to deposit and withdraw money at your convenience. Cash Deposit Machines (CDMs) allow you to deposit cash directly into your account and deposit cheques. Alternatively, you can deposit or withdraw cash through teller counters available at the bank’s branches. However, please note that many banks charge a fee for some teller transactions which you can avoid by using the bank’s digital channels. Today, most transactions can be done online or through apps at low to no costs.