​Understanding bank accounts

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05 Nov 2018 | 4 min. read

A bank account is a convenient way for you to save and manage your money. Different types of accounts serve different needs. Find out about savings, current and fixed deposit accounts and how you can use them.

Key takeaways

  • Savings, current and fixed deposit accounts each have their own features and uses.
  • For everyday money management, go for a current, savings or a combined current and savings account.
  • For medium to long-term savings, a fixed deposit account is more appropriate.
  • Before you open an account, check the terms and conditions, including fees and minimum balance.
  • Two or more people can open a joint account.

What it is

A bank account is a convenient way to help you manage your money. It can help you keep track of your savings and how you spend your money.

Your salary or wages can be paid into your account. You can pay bills, make purchases and receive money, e.g. as cash deposits and cheques through your bank account. You can make these transactions by visiting a bank branch or using the bank’s Automated Teller Machine (ATM). You can also make them using the phone or online.

At the same time, you can earn interest for your deposits with some types of accounts.

Types of bank accounts

There are three main types of bank accounts: savings, current and fixed deposit accounts.

Each type has its own set of features. Choose your account based on what you want to use it for:

  • If you are going to use your account for day-to-day money management such as to pay bills, a current, savings or a combined current and savings account will be more useful.
  • If you are thinking of putting aside a sum of money for medium to long-term savings, then you may prefer to open a fixed deposit account.

Key features of bank accounts

Feature Savings Current Fixed deposit
Interest bearing Depends on product feature
Fixed maturity X X
Deposit anytime X
Withdraw anytime X*
Cheque book X X
Passbook X X

*If you need to withdraw money from your fixed deposit before the maturity date (this is an early or premature withdrawal), you may receive no interest or suffer partial loss of interest on the deposit.

Before you open an account

There are other conditions to be aware of. Before opening a bank account, here are a few things to check.

For all accounts:

  • What is the minimum deposit to open an account?
  • What is the interest? How is it calculated and when is it credited?
  • What fees or charges apply?

For savings and current accounts:

  • Minimum balance required. What charges apply if amount falls below minimum balance?
  • What withdrawal limits apply at branch or ATM?
  • Minimum account holding period. What penalties apply if account is closed earlier?
  • (For current account only) Are there charges for cheques?

For fixed deposits:

  • Is the deposit automatically rolled over on maturity date?
  • What if withdrawal is made before maturity? What penalties or charges apply? Is interest still payable?

Types of joint accounts

If two or more people want to open an account together, they may open a joint account. In a joint account, the names of all the account holders will appear on the account.

You can choose to have the joint account operate either on a joint-alternate or joint-all basis.

Joint-alternate

In a joint-alternate account, each of the account holders may perform banking transactions on that account (e.g. withdraw money, write cheques or close the account) individually.

You can be held liable for any borrowing on a joint-alternate account even if the account is operated by a single signatory. For instance, if the other joint account holder writes a cheque when there is not enough money in the joint account to pay, the bank can hold you both liable for the amount outstanding.

Joint-all

For joint-all accounts, the instruction for the banking transaction must be given by all account holders.

Joint and several liability

If there is a “joint and several liability” clause in the agreement, the bank has the option of suing you and your joint account holder together, or choose to sue either you or your joint account holder only.

Opening or closing an account

You can get an application form from the bank, either at a branch, by mail or by downloading the form from the bank’s website. Get ready supporting documents requested by the bank, such as proof of identification. Do ask the bank to explain to you key Terms and Conditions which apply to the account.

Before you open an account, the bank has to conduct a "Know your customer" review to understand a customer's profile and the purpose of the account. The identification document is required to verify the identity of the applicant before the account is opened.

When you close an account, some banks may charge an early account closure fee if the account is opened for less than a certain period of time. In some cases, the bank may even reduce the interest you would have earned.

CPFIS and SRS accounts

The CPF Investment Scheme (CPFIS) account allows you to use your CPF savings to invest in various financial products such as shares, unit trusts, insurance, and bonds. Only local banks and selected Qualifying Full Banks are eligible to provide these accounts.

The Supplementary Retirement Scheme (SRS) account helps you to enjoy tax relief while building your funds for retirement. Again, only local banks and selected Qualifying Full Banks are eligible to provide SRS accounts.

Services for savings and current account holders

The following services are usually available to savings and current account holders. Ask your bank for more details as well as the fees and charges which apply.

Statements

Your bank will send monthly or quarterly bank statements which lists all the transactions that took place in the past month or quarter, in your account. These may be available in physical hard copy format or in the form of e-statements.

You can also opt for e-statements if these are provided by your bank. Only account holders who have applied for online banking can check their transactions online.

ATM card

With this card, you can deposit, withdraw or transfer money at an Automated Teller Machine (ATM), using your Personal Identification Number (PIN). You can choose which bank account to link your ATM card to. You may also set limits for withdrawals at the ATM.

Debit card

Debit cards are similar to ATM cards. You can use your debit card with your PIN to withdraw cash from your bank account at your bank’s ATMs. You can use it to purchase goods and services. You can spend only the amount in your account. Make sure your card is safe at all times.

Last updated on 05 Nov 2018