Transaction accounts and debit cards

A transaction account is for your day-to-day banking such as paying bills and getting paid your wages.

How transaction accounts work

Transaction accounts are often called 'everyday accounts'. They help you pay for everyday expenses like groceries, bills, or takeaway coffee. 

Using your account more often can mean paying more in fees. Comparing features can help you save more of your money. 

Look for low or no-fees

Some transaction accounts charge monthly account-keeping fees and other fees for things like ATM withdrawals and internet banking.

Think about your spending habits and choose the account with the lowest fees. For example, if you often use ATMs, choose an account that has low or no ATM fees.

Not all transaction accounts have fees, so look for a no-fee account.

Basic bank accounts

If you get a government payment or have a concession card like a Pensioner Concession Card, Health Card, or Commonwealth Seniors Health Card, you may be able to get a 'basic bank account'. These accounts have:

• no account-keeping fees
• free monthly statements
• no minimum deposit amount
• no overdraft fee

Contact your bank to check if you're eligible.

Contactless payments

Most debit cards have a contactless ('tap and go') payment option, like Visa's payWave or Mastercard's PayPass. This means you don't have to insert or swipe your card or use your PIN for transactions under $200.

Many accounts also have 'digital wallet' options such as Google Pay and Apple Pay. These allow you to pay for things with your smartphone or smartwatch instead of using a card.

Check what your options are when you choose your transaction account.

Beware of overdraft fees

If you spend more money than is in your account, it's called going into overdraft.

If you go into overdraft, you may have to pay an overdrawn fee and interest.

Make sure you regularly check your account balance. Leave enough in your account for any automatic payments that you've set up, like direct debits. Setting up a low balance alert can also be helpful.

Debit versus credit cards

Most transaction accounts come with a debit card for withdrawing cash and making purchases. Using a debit card helps you keep control of your spending, but different payment methods can suit different situations. Here's some of the key things to know about each. 

Debit cards

Benefits

• Control your spending – When you use a debit card to pay for things, you are spending the money in your account. If there's no money in the account, you can't make a purchase.
• Less risk of debt – Using a debit card is less risky than using a credit card, because you can't run up a debt. 
• Lower cost – Because you aren't borrowing money, you aren't paying interest on what you spend.

Watch outs

• Debit cards with access to credit – Some debit cards are 'dual network cards', which means you can also use them as a credit card. If you do use your debit card as a credit card, you could be charged high interest. You might end up paying more than you would on a regular credit card.
• If you are trying to avoid debt – If you are switching to a debit card to avoid debt, make sure your debit card does not have a credit option.

Credit cards

Benefits

• Helpful in emergencies – If you don’t have cash in an account, a credit card may be helpful to pay for something in an emergency.
• Can improve your credit score – If you pay off your credit card every month and use it responsibly, it could help improve your credit score.
• Rewards programs – You could earn points from using your credit card for expenses, to put towards things like vouchers or travel.

Watch outs

• Costs can add up – you may be charged fees and interest on purchases if you don’t pay the balance in full by the due date
• You need to manage it – to use a credit card responsibly, you need to make sure to pay it off in full every month to avoid interest and to watch your spending.
• Risk of debt – because you are borrowing the money, it can be easy to forget that it’s not yours and overspend.

Find out more about credit cards.

How to compare transaction accounts

Compare transaction accounts to find the one with the lowest fees and a debit card that suits your needs.

Your current provider's default transaction account may not be the best option.

To find a transaction account that suits your needs, compare these fees and features:

Review your transaction account every year

Banks often offer new accounts with competitive features. Compare the fees and features and consider switching bank accounts if you find one that suits you better. Consider calling your bank to talk through the options.

If you decide to switch, make sure to change details of any direct debits to or from the account. 

Take action: Set up a reminder in your calendar to review your account and compare it to other offers each year.