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Has it ever happened that you need money instantly but your bank account does not permit such hefty transactions? Let’s say that you receive a huge order for business and you need money immediately to place an order for the same or one day you decide to take a vacation break out of the blue. There are many situations where we need our money handy without any restrictions from our banks. The checking account offers solution to these problems and many others. Checking account, also known as a transaction account, Checking Account, Demand Deposit Account or Share Draft Account, is a highly liquid deposit account held at a bank or any financial institution. It is referred to as ‘highly liquid’ because of the instant accessibility of deposit and withdrawal allowed on this type of bank account. Though the interest offered on the checking account is very low or sometimes nothing, it is a preferable type of account if you are looking for those hassle-free quick transactions. The checking account allows you to borrow money from your deposits through cheques, ATM, and e-transfer.
There are several types of bank accounts available in UAE:
Savings account is a deposit account held in any bank offering modest interest rates on the balance and securing your money. While the account allows you to make maximum deposits, withdrawal from this type of account is restricted to a limited number of transactions with a capping on amount as well.
A fixed deposit is a rigid form of deposit account that offers an attractive interest to the account holder. However, the fixed deposit is restricted by a pre-determined, mutually agreed maturity date. You will not be able to borrow or withdraw the amount before the maturity date. In case you need to break this fixed deposit, you may need to pay some penalty.
A salary account is usually opened by the employer for a smooth transaction of salaries and bonus to the employee’s account. Usually, these accounts cannot be opened in the banks in UAE without the direction or request of the major companies or big corporations. Once the account is opened, the employee is given the control of their account and the company is not allowed to make any interference except depositing salaries.
In order to make it easier to track your business transactions, the banks in UAE offer separate business accounts. This type of account also allows you to avail transactions without any delays.
|Checking Account||Savings Account||Fixed Deposit||Salary Account||Business Account|
|-Allows hefty transactions
-No limit on withdrawals
-Designed for businessmen or entrepreneurs
-Low or no interests
-Most liquid form of deposit account after checking account
-Beneficial for limited transactions
-Designed for daily use
|-High Interest Rate
-Assured returns with no risks
-Stable source of earning high interest
|-Usually no minimum balance
-Receiving salaries on time hassle-free
-Beneficial for the employer and the employees
|-Easy tracking of transactions
-Hefty amount transactions
-No limit on withdrawals
In UAE, there are two types of Checking Accounts divided on the basis of the facilities offered: Standard Checking Account and Checking Account with additional benefits. The Standard Checking Account is the regular Checking Account providing all the aforementioned benefits. The Checking Account with additional benefits provides more benefits covering travel insurance, special interest rates, etc. These benefits vary from one bank to the other so it will be useful to enquire and compare the benefits that are offered by various banks.
Despite low interests rates offered in the Checking Accounts, there are many benefits which make Checking Account a more viable option for your financial needs. Firstly,
1. Taking Advantage of Flexibility
Unlike the restrictions on the Savings Account there are few or no limitations for the frequency and amount of withdrawal. So you can use this account for your heavier payments.
2. Reducing Fees and Charges
Similar to Savings Accounts, the Checking Accounts charge fees too but there is a way for you to get rid of these charges. According to the guidelines of different banks, you can maintain a minimum balance or deposit some amount every month to waive this fee.
3. Using Overdrafting Option
There might be times when you need some money but your account does not have enough balance. The Checking Account offers Overdrafting Option where the bank will charge you an overdraft fee in lieu of covering the transactions that exceed your account balance. Besides, your bank also may offer Overdrafting protection where you can link your Savings Account to your Checking Account. Such a protection transfers the amount from your Savings Account to the Credit Account if your balance is low but be careful about the Overfdraft fees.
4. Impact on Credit Score
Under certain circumstances, a checking account might affect your credit score. For instance, you used your credit through overdraft option. The bank adds credit to your account and your account balance runs to negative. In case you fail to restore your bank account balance to positive, your credit score will be seriously hampered. However, using Checking Account for regular transactions, or repaying the amount to bank on time does not affect your credit score. Also, a dormant Checking Account does not create an impact on your credit as well.
Various banks give different offers on their Checking Accounts at different interest rates. Some banks may also provide extra facilities on your Checking Account. Therefore, it might be useful to check these factors before accessing a Checking Account. However, locating details for each bank is generally a time consuming process, so you can check and compare those details at policybazaar.ae.