Whenever you go to an ATM to get some cash, the machine will ask you if you’d like to withdraw funds from your current account or savings account. This might have confused you at some point, as you might have thought that you’d only have one account with your bank.
But what’s interesting is that under just one bank account, there can be other types of accounts. All of them serve different purposes, and you can opt for whatever suits your needs the best. With that, let’s look at the types of bank accounts that are available in Malaysia.
1. Savings account
This one’s no stranger to us, and pretty much all of us have a savings account. This is where you deposit your salary, or just about any other payments made to you if you aren’t a business holder. As you keep your money in your savings account, the bank will give you an interest based on that amount.
The interest rate isn’t usually high, but of course, the longer you leave your money in the account, the more returns you’ll be seeing. Some banks also offer higher interest rates than others, so if you’re thinking of opening a new savings account, you can check out which bank will reward you the best before deciding.
Besides that, some banks also have different types of saving accounts which are catered to various groups of people. For example, Maybank has saving accounts for kids, teens as well as Shariah-compliant accounts, among others.
2. Current account
Technically, a current account also is somewhat of a savings account, but there are some key differences. For one, the number of transactions you can make with a savings account is more limited. If you’re someone who has to deposit money every single day, a current account would be more suitable for you. Business people, for example, would usually opt for a current account.
Secondly, payments to current accounts are usually made via cheques, as they are meant for larger amounts of deposits. Current accounts will also give you higher interest rates than savings accounts, but again, you’d have to deposit a big amount before you see any returns.
While you just need to deposit a small amount of money to open a savings account, to get a current account, you might need to part with a few hundred ringgit.
Current accounts are also called checking/chequing accounts or demand deposit accounts.
3. Fixed deposit account
Also known as a term account, a fixed deposit is an account you keep money in untouched for a relatively long period of time. Unlike with savings and current accounts, with a fixed deposit, your money is essentially “frozen” until its maturity period. The maturity period can run from a few months up to a few years, depending on the bank.
Now, because your money is left there untouched for quite a while, it will gain a good amount of interest. And the longer your maturity period, the higher your interest. Because of this, fixed deposits are known as investments.
While they can make good investments due to their lucrative returns, bear in mind that you won’t be able to withdraw your money until the term comes to an end. So if you’re looking to start an emergency fund, for example, a fixed deposit account would not be suitable for this purpose.
4. Islamic savings/current/fixed deposit account
Islamic savings, current or fixed accounts have the same functions as their conventional counterparts, but the differences lie in the principles on which they are based. Under Islamic banking, these facilities are tweaked to be Shariah-compliant. What this means is that instead of it being interest-driven, the accounts will give you profit instead.
Most banks in Malaysia have Islamic banking, and they follow principles such as:
- Mudharabah: a partnership where two parties share the profit. One party provides the capital, while the other contributes the skill and labour
- Qard: interest-free financing
- Wadiah: a principle of safekeeping someone’s money and being responsible for it
If you don’t already have any of these in your bank account, you can still opt for them at any time. Again, remember that the requirements, interest rates, deposit amounts and so on will vary from bank to bank. To get the most rewarding deal, get in touch with your bank to find out more.
Speaking of bank accounts, ever wondered what happens when you transfer money to the wrong account? Read the article below to find out!
Transferred Money To The Wrong Bank Account? Here’s What You Should Do