Understanding bank accounts

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 as savings, then you may prefer to open a fixed deposit account

*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. In some cases, you may also need to pay a fee which could potentially result in you receiving less than the initial deposit placed.

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 fixed deposits:

• Will you need the funds you intend to place in fixed deposits before it reaches maturity date?

• Are there conditions to meet for the rates on offer such as minimum sum of deposits?

• Can withdrawal be made before maturity? what penalties or charge will apply? Is interest still payable?

• How do I specify instructions for the banks' treatment of my fixed deposits when they mature? If no instruction is provided, is the deposit automatically rolled over on maturity date, and if so, which amount will be rolled over (e.g. principal only or principal with accrued interest) and what would be the rollover rate (e.g. prevailing Board rate or prevailing promotional rate)?

• Is it possible for you to change your fixed deposit maturity instructions on the date of maturity?

• Fixed deposit rates and features vary across banks. For instance, some banks may require you to meet a minimum deposit requirement in order to be entitled to a promotional rate. Banks may also provide you with various options to manage your matured fixed deposit, such as rolling over matured fixed deposit in different manners (e.g. principal only or principal with accrued interest) or crediting the amounts to your bank account. If you choose to automatically roll over your fixed deposit, you may wish to approach your bank when maturity date is near to find out the prevailing rate at which your fixed deposit will be rolled-over at.

• It may also be helpful to compare fixed deposit rates and their features using online resources such as finance blogs or websites, like the Institute for Financial Literacy's fixed deposit rates comparator. These blogs and websites often have comparison tables of fixed deposit rates across a number of banks and can be a useful reference if you are considering placing a fixed deposit. After doing your own research, do approach the banks directly to confirm the prevailing and applicable fixed deposit rates on offer and the terms and conditions that apply to you, before placing your deposit.

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.

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.