One of the basic things you need to do before you leave for overseas work is to open a bank account, preferably with remittance feature. This way, it will be easier for your to transfer money at the cheapest cost. Plus, you get to have a savings account as well, thereby making it easier for you to save.
Apparently, there are two types of deposit accounts: savings and current account. Learn about the difference between the two and find out the best one for you.
Savings account is the most common deposit account opened not just by OFWs but by many people. This type of account is often used to save and safekeep your hard-earned money to help meet both short- and long-term financial needs. You can also choose between passbook or ATM (or both, depending on the bank).
Advantages of Savings Account
The good thing about opening a savings account is that it is cheaper to open, with some banks allowing P500 to open an account. For OFWs, banks do not have initial deposit requirement (except for BDO, which requires you to deposit P100), which means you can easily and conveniently open an account.
Savings account is also cheaper to maintain, with a required maintaining balance of P2,000 or P3,000. If you plan to get a savings account with remittance facility, maintaining balance is waived by banks, which is an advantage for you since you get
Aside from this, savings account, whether a regular savings account or account intended for OFWs, has the ability to earn interest, which ranges from 0.1 to 1.5 percent, depending on the bank. It may not be that big compared to other investment options, but it’s better than nothing, don’t you think? Nonetheless, banks require a maintaining balance to earn interest, so it’s best to take note of that.
Disadvantages of Savings Account
Apparently, there is a limitation imposed on savings account. Daily transaction limit is strictly imposed, so make sure to ask about it and take note of it.
Also, the medium of payment is limited when you have savings account. In fact, you are only allowed to use ATM or debit card (ideal when making purchases) and over-the-counter payments.
A current or checking account is a type of deposit account used to pay frequent money transactions like payment of tuition fee and bills. This type of account is also required to repay loans by issuing post-dated checks.
Advantages of Checking or Current Account
Having a checking account is ideal for payment of financial transactions since check payment is still the preferred method, especially in business. There is also no limitation as to how many checks you can issue and the amount you can withdraw from the account. Compared to cash, check is safer to carry around. There is also an overdraft facility, which is helpful in case of emergency and you have limited cash with you.
One of the biggest advantages of having a current account is it allows you to separate business transactions and expenses from your personal ones, especially if you have your own business.
Disadvantages of Current Account
On the other hand, don’t expect to grow you money in checking accounts since this is typically zero interest. Some banks offer interest, but you need to meet their maintaining balance required to earn interest. It is also expensive to open and even more expensive to maintain since the required amount is minimum of P5,000.
You also have to be careful when issuing checks since bounced checks come with penalty fees and worse, imprisonment. It could also cause a negative effect on your credit score, so make sure not to issue checks when your account has low value.
Which one should you get?
It depends on your needs and financial goals. If your aim to have an account dedicated for savings and remittance, then a savings account will do. In case you plan to put up a business, having a checking account is a must to facilitate transactions more conveniently.