A savings account is a bank account where you can put away money for later use, either in a lump sum or on a monthly basis and there are two options: fixed-term or flexible savings accounts. Savings accounts are useful for building up funds for unforeseen expenses, such as car repairs, or for a particular goal, such as tertiary education or an overseas holiday. They can also be used to accumulate money for an investment that requires a larger sum which you do not yet have.
Fixed-term savings account (also called a fixed deposit)
A fixed-term savings account is an account in which the deposit is held for a fixed-term or in which withdrawals can be made only after giving notice. Most banks would offer a higher interest rate for leaving the money untouched for a longer period.
Flexible savings account
A flexible savings account has the option for you to withdraw funds whenever you need it, but earns a slightly lower rate of interest for the flexibility.
A debit order is an arrangement whereby you give a third party permission to regularly debit your account, for example to pay a cellphone contract. The amount may vary each month and the debit order lasts as long as there is a contract between you and the company debiting your account. Debit orders can only be used if the company is authorised by the bank to use the debit order system. A debit order must be amended or cancelled on request from the Third Party who is debiting the client’s account.
A stop order is an arrangement between you and the bank to pay a third party a fixed amount every month, at specified intervals for a certain period as stated by the client for example rent payments to a landlord. Stop orders cost more than debit orders to set up because the bank has to do more administrative work. However, because you are in control of the order, it is a safer route as the third party has no control and cannot increase your payments without warning. A stop order must be amended or cancelled on request from the client’s bank.
Third-party payment (Transfers)
Technically, both stop orders and debit orders are ways to make third-party payments, but nowadays the term is mainly used to describe making payments via the Internet or ATM. The person or company you are paying is called the beneficiary. Most Internet banking sites allow you to load beneficiaries yourself, either as a once-off or regular payment. Paying beneficiaries online is more cost-effective than using a stop or debit order and gives you more control over your finances.
Do you struggle to understand financial terms? Which are the ones you battle with most?