Saving account, current acaccount transactional account, bundled account, privilege account. All these words being thrown at you at the bank when all you want is to open an account can be to say the least daunting unless of course you are a banker or have studied business related courses.
Basically all these accounts can be divided into, savings and current accounts. Both types of accounts may serve the same purpose with the only difference being that one, the current account, will usually have a cheque book. Another distinction is in the way the accounts are run, for a savings account any payments to a third party will be done through the owner of the account by either going to the bank or accessing alternative channels at his cost. On the other hand a current account holder will issue a cheque book to a supplier, creditor or vendor and the payment will be done at no cost when the cheque clears.
So let’s talk savings accounts first. Saving accounts may be clustered into two major categories, transactional and bundled. Transactional accounts include salary accounts, children accounts, student accounts, group accounts etc. Why are they called transactional? The account holder is at liberty to withdraw and make deposits as many times as he wishes. In fact the bank will ensure they issue you with a debit card and also register you for mobile banking. The billing on transactional accounts are based on transactions, the more you transact the more the charges. Bundled saving accounts on the hand have limitations on the number of withdrawals you can make in a year and at the same will deny you operating tools. This account in most banks, if not all, attracts no ledger fees and no withdrawal charges. Most banks peg the withdrawals at once per quarter while about two or three allow for semi annual withdrawals. Just to get a glimpse of what am talking about I’ll give examples,Haba na Haba- Co-operative Bank, Simba-KCB Bank and Akiba-National Bank. There is of course a new tackle that has been used by one major bank to lock the account for one’s period of choice to reach a certain target then unlock. Bundled saving accounts have an advantage of earning an interest, based on monthly balances and compounded, and the interest credited or paid into the account at the end of the calendar year. At the moment, as a result of the interest capping act upon the amendment of The Banking Act in 2016, banks peg the interest on the CBK rate and it currently stands at 7%(as at 24th July 2017). The bundled saving accounts are tagged to attract serious savers who can self instill the discipline of not withdrawing cash every now and again. If you flout this limitation then two things are bound to happen, you forfeit the interest for that period and or may have your account converted to a transactional account automatically.
Moving on swiftly to the big leagues, current accounts. These too are categorized into transactional and bundled current accounts. Like the transactional saving account, the transactional current accounts attracts a ledger fee and billing per single transaction. Current accounts are run using a cheque book, which the banks will charge you for. There is a punitive charge for not using your cheque leaf to transact, counter cheque charges. The cheque book allows you to avoid unnecessary withdrawal charges by issuing cheques to your creditors. In fact you can even issue a post dated cheque for payments to be made in the future. Bundled current accounts have a fixed bundle charge with different offers depending on your need. You may get free withdrawals over the counter, free ATM withdrawals, all at a fee or even express services. For an account that is busy, bundled current accounts are ideal so as not to attract cash handling fees and to cut on the transactional costs. While current accounts are ideal for companies they can also be used by individuals. Not all current accounts may allow for access to debit cards and digital banking depending on the signing mandate of the account.
It is paramount that you ask for these details so as to make comparisons to make a favorable choice. Let’s meets on the next post as we simplify banking.
Akinyi, the Banker.