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Everything You Need to Know About Opening a Bank Account
Banks are perhaps among the most prevalent financial institutions nowadays. In fact, it wouldn’t be surprising to know that almost every person you work with or meet in the Philippines has an existing bank account. Not only are bank accounts convenient, but they also allow you to save and make investments. They also let you shoulder some of your financial burdens should you need to borrow a certain amount of money.
There are a lot of things you can do with banks, but knowing exactly how bank accounts work will help you maximize their potential. To help you, we have prepared a quick guide to bank accounts, including some tips in selecting the bank account that works best for you and your needs.
What is a bank account?
A bank account is a type of financial account that banks maintain for their clients and customers. There are different types of bank accounts that individuals can avail, with many even maintaining multiple types all at the same time. Bank accounts are offered and run by financial institutions. Your account represents the funds that your chosen financial institution has entrusted to you or you have entrusted to your bank as their customer.
Usually, all banks will monitor all financial transactions that the customer has done over a month and will submit a monthly statement report to the client. The customer will then be given a period within which to balance their accounts and make sure that those remain in good financial standing.
Bank accounts generally have two main structures. They may either have a positive structure or a negative structure, mostly based on the nature of who owes money to whom. A bank account with a positive structure is called a credit balance, which means that the financial institution owed money to the client. On the other hand, there are also bank accounts that are negatively structured. These are called debit balances, and this is where the client or customer owes money to the financial institution.
What are the Different Types of Bank Accounts in the Philippines?
You cannot just choose a random type of bank account and call it a day. Depending on what your needs are and what you’re going to use your bank account for, there are certainly some bank accounts that would work better for you compared to others.
In the Philippines, there are numerous types of bank accounts that you can avail of. Here are some of the most common types of bank accounts that you can get if you live in the Philippines:
A savings account is one of the most basic bank accounts anyone could have. You can place your money in that account by depositing it in authorized avenues. Your money will then remain in the custody of the bank until you withdraw it from your account. It even has an interest rate that can raise the value of your stashed fund per year. However, most interest rates for savings accounts are admittedly not that high.
Savings accounts are so common that anyone who can provide the primary requirements can open one. Even children (with guidance from the parents) and retired individuals who want another savings account from a different bank can open an account.
Having a savings account is truly beneficial, as you can withdraw money any time you like as long as there are nearby banks, bank partners, or automated teller machines (ATMs) around. As a result, there would be no need to bring a large amount of cash with you anymore. Just get the amount you need and store the rest in your account.
Of course, there are limits to how you can use your savings account. The amount of money you can withdraw can be limited, especially if you’re withdrawing from an ATM. It also wouldn’t be wise to store all your monetary assets in a single savings account. That’s because the probable growth of your funds will be slow due to the minimal interest rate.
However, if you’re new to financial services and want to have a basic bank account for your convenience, then a savings account is perfect for you.
A payroll account is a type of bank account that businesses exclusively use to pay their employees every end of the cutoff period. Companies have payroll accounts to make their payments to their employees more efficient and secure.
Generally, the payroll process involves banks getting a report of the employees’ summary of wages, and the net wage is deposited straight to each employee’s payroll account. More often than not, this utilizes an electronic funds transfer system as opposed to the old way of just handing out checks.
What’s beneficial on the side of businesses when using payroll accounts is that they will have an easier time giving wages. That’s because there won’t be outstanding checks on the occasion that their employees don’t cash out their wages on time. Instead, they can deposit the amount directly to the employees’ payroll account and be done with it.
It is also advantageous on the side of the employees since they won’t need to cash in or deposit their checks physically anymore. Now, all they need to do is wait until the salary date. After which, their pay will automatically deposit into their account.
An ATM savings account is a type of bank account that provides its holders the convenience of being able to withdraw cash from ATMs and the ability to pay bills using the ATM. If your ATM account doubles as a debit card, then you’ll be able to take advantage of cashless transactions when shopping, dining, and other spending categories in authorized establishments. A debit-supported ATM account is advantageous, as it provides you financial freedom without having to withdraw a considerable amount of money from your account.
A passbook account is basically like a savings account, but the transactions get recorded in a passbook. When you have a passbook account, you’ll be able to earn interest, deposit, and make withdrawals with your bank. It’ll also be easier to monitor your account by updating the passbook. This form of savings account is more secure than others. Its monitoring feature also encourages its users to track spending and develop good savings habits.
Of course, having a passbook alone is not as convenient as having a card, especially since you’re only allowed to make withdrawals with the bank that you’re a part of. But don’t worry, you have the option to own a complementary EMV debit card, giving you access to ATMs at your convenience.
A checking account is a type of bank account that lets its owner deposit checks, pay bills, and withdraw money accordingly. Paper checks, although already losing steam because of the convenience of alternative instruments like debit cards, are still a key feature that makes checking accounts unique. Nowadays, checking accounts can also use debit cards or check cards to help streamline services. They also have online counterparts that let its users pay bills online.
If you’re someone who needs an avenue to deposit cash or a check, a checking account is one of the options you can choose. People who use checking accounts keep a rather small balance, as having a checking account is significantly more convenient than carrying cash around.
Although checking accounts are useful for storing money, having this type of account is subject to a variety of fees. If you don’t balance your account wisely, you can end up accumulating fees through time. Make sure always to review your checking account so that minimum balance requirements and maintenance fees are in check.
As mentioned above, one of the most important things you should do when you have a checking account is to balance it every month. That way, you can avoid being surprised by fees and will be able to review your account for any possible errors. If you receive your salary through paychecks, you can also set up a direct deposit so that your wage is streamed directly into your checking account. It’ll make things convenient for you every time payday comes.
A time deposit is a type of interest-bearing bank deposit account that features an exact date of maturity. In this type of account, the money you deposit in the should remain there for a fixed period for it to accumulate interest. The maturity date for time deposits lasts anywhere between a month to five years. This type of account is an alternative to have a typical savings account. However, the difference is that you’re not allowed to withdraw any time you want, and the interest rate for time deposit accounts is usually higher.
If you withdraw money early from a time deposit account, you’ll usually need to pay an early withdrawal fee. Also, while the interest rate for this is higher than a typical savings account, it still doesn’t match the type of returns you can get if you use the money in other investment opportunities. The interest rates for time deposits don’t keep up with inflation rates very well, so your money could end up with low yields by the time your account matures.
When making a time deposit, you should make sure that you’re aware of all the details surrounding this type of bank account. It has its advantages, but it also has its downsides. Be informed and know if this type of account is for you based on what you want to do with your money.
Dollar or Foreign Currency Account
A foreign currency account is a type of bank account that lets you send and receive funds in multiple foreign currencies. With the help of this type of account, you can exchange your money to U.S. dollars or hold it in your currency until you’re ready to trade them from one point to another.
If you make overseas payment often, having this type of bank account will be incredibly helpful. Not only will this help you manage your finances well, but you’ll also have a streamlined experience while transferring money abroad. That enables you to save money and time along the way.
With a foreign currency account, you’ll have the opportunity to switch among the authorized currencies. As such, you can take advantage of the exchange rates and send money without extra overhead wiring fees or bank-to-bank transfer fees. Most foreign currency accounts include U.S. dollars, Australian dollars, Euro, Japanese Yen, Renminbi, and U.K. pound sterling, among others.
A joint account is a type of shared bank account among two or more individuals. Usually, this type of bank account is used by family members, relatives, couples, and business partners. The people listed under joint bank accounts will have equal access to the account. However, take note that just as they have equal access to the funds, owners also share the responsibility for all the fees associated with maintaining the account.
In joint bank accounts, you can make deposits, connect credit cards, get loans, lines of credit, and even mortgages. It works just like any other account, but it has an extra feature of having a shared responsibility.
A joint bank account is useful if you want to have it easier when it comes to maintaining a minimum balance. You can also access bank benefits more quickly when your bank account holds more monetary savings. While it has its share of conveniences, you have to make sure that you share your bank account with people you trust.
Since the responsibilities for a joint bank account is shared, you’ll be liable as well in case your account co-holder runs up your card or if it goes into overdraft. It’s only advisable to share bank accounts with people you trust—those with non-frivolous spending habits. You and your account co-holders must know your responsibilities when opening a bank account together to prevent unnecessary financial issues and conflicts.
What is the difference between getting an ATM and a Passbook Account?
In theory, both an ATM and a passbook account work the same way. You can deposit and withdraw money from your account, and the money you left will accumulate interest over time. However, the mechanics behind these have their differences when you compare ATM accounts and passbook accounts.
In an ATM account, you have 24/7 access to your money as long as you can find a viable ATM in your area. It’s quite convenient, as you can withdraw money anytime you want and even deposit money to your account using deposit machines.
At the same time, you can still line up and withdraw or deposit money from the bank. It’s required and highly advisable to do so, especially if you’re dealing with a considerable amount of money. But for straightforward withdrawals, there’s no denying that ATM accounts are your best bet to getting access to your money 24/7.
There’s also a lower maintaining balance for ATM accounts, so you can pull out the money you need without fear of exorbitant fees and fines. Add the fact that it also accumulates interest over time, and you can pay your bills via ATM, and you’ll surely enjoy the convenience and ease of owning and maintaining an ATM bank account.
A passbook account, on the other hand, requires your physical presence in the bank before you can make any transaction—be it withdrawals or deposits. This type of account usually has a larger maintaining balance as well. Thus, you can’t just pull out all your money whenever you like unless you’re okay with facing fines and fees from your bank. You may think that having a passbook account is not convenient, especially with the presence of an ATM account. You may even ask: why do people still have passbook accounts in this day and age?
The answer to that is simple: having a passbook account makes it easier for you to save money in the long run. ATM bank accounts are convenient for storing cash and taking it out when a time of need arises. Still, there’s no denying that most people withdraw money upon being tempted to purchase something in-store or online. Without you knowing, you’ve already emptied your ATM account because of your frivolous spending habits.
In the case of passbook accounts, since it’s less convenient to bring a passbook, line up in the bank, and do all the paperwork that comes with withdrawing money, you’ll find less incentives to pull out your money from the account. There’s also a higher maintaining balance in passbook accounts, so you won’t be tempted to empty your account unless you’re willing to pay the fees.
Lastly, passbook accounts have higher interest rates than ATM accounts. That means that the money you don’t spend will eventually grow over time at a higher rate when you place it in passbook accounts as opposed to when you put it in ATM accounts.
However, there are banks nowadays like BDO that allows you to have a complementary EMV debit card together with your passbook. It merges the idea of passbook accounts and ATM accounts, so it’ll be interesting to see how that will affect people’s spending habits in the future.
How Do I Open a Bank Account?
Depending on the type of bank account you want to open, there might be different requirements and documents needed for each. However, the mechanics of opening a bank account is typically the same. Of course, it isn’t as easy as walking to a bank and handing out your money. You have to think about the type of account you want based on your needs and meet the requirements before you’re allowed to open an account.
To give you a basic idea of how it works, here are the necessary steps in opening a bank account:
Make sure that you meet the minimum requirements when opening an account.
These requirements usually need you to be at a particular minimum age, possess valid IDs, have the minimum amount of money to open your account, among others. It’s a good idea to research the requirements before going to the bank and requesting an account. Otherwise, your trip might end up being a waste since some banks don’t entertain requests from people who haven’t prepared the requirements.
Research on the best type of bank accounts for you.
It won’t make sense to open a joint bank account if you’re only going to use it by yourself. Similarly, there’s no reason for you to open a time deposit if you think you’ll need the money you contribute to your account immediately.
By understanding the type of bank accounts available, you’ll be able to determine which type caters to your needs the most. The most common type of account people get are savings accounts. See if you have special needs that you won’t be able to get with a savings account, and find that particular feature on the other types of existing bank accounts. Otherwise, then opening a savings account is an excellent start for anybody.
Select a bank you can trust.
There are numerous banks available in the Philippines, and each offers unique features for particular accounts. Before opening a bank account, make sure that the bank you approach is reputable and secure. The worst thing you could ever do is open an account in a bank that doesn’t have a favorable reputation with the public.
Some of the most reputable banks in the Philippines are BPI, BDO, PNB, Landbank, and Metrobank. If you don’t think that these banks will be able to cater to your needs as a client, then there are other banks you can choose from—both large chain banks and smaller local banks.
Submit your requirements and study the terms of the agreement.
Once you’ve chosen the bank you want and the type of bank account you need, now is the time to submit the requirements to open your long-awaited bank account. Make sure you prepare all the necessary items ahead of time so that you wouldn’t need to come back again to resubmit incorrect documents.
Also, before you sign on the dotted lines, read through the terms of the agreement and make sure that you understand every line. That way, you’ll be aware of all the charges, maintenance requirements, and details that come with opening a bank account.
Of course, the process may differ from bank to bank. But these are the general steps that you should do when trying to open a bank account anywhere. To have a more accurate guide, select the bank you want to open an account in and look for their general guidelines to opening a bank account.
What Features Should I Look Out for in Bank Accounts?
Not all bank accounts offer the same features for everyone. To make themselves more attractive options than others, some banks tweak their key features to attract more clients.
As a potential client, you have to take advantage of these features and ensure that you get the best deal possible when making your new bank account. Here are some of the features you should look out for when scouting for a new bank to open an account in:
As mentioned in earlier sections, the money you don’t spend in your bank account (assuming that they meet the minimum requirement) will accumulate interest over time. Of course, the interest rate depends on where you’re planning to open your account and what type of account you’re going to open.
For example, in BDO, a BDO Optimum Savings Account Personal has an interest rate of 1.25%. However, you need at least PHP30,000 to earn interest. Another type of account in BDO is the BDO Peso ATM account. It’ll allow you to accumulate 0.25% in interest if you maintain a minimum amount of PHP 5,000 in your account.
In general, the average interest rates varies from 0.25% (Metrobank) to 0.50% (BPI). It’s a good idea to find a consolidated list of interest rates per account type offered by each bank to gauge what bank, rate, and account type would work for you.
Minimum Initial Deposit
Depending on the type of account you’re going to open, the required minimum initial deposit may vary from bank to bank. You have to make sure that you bring enough money for this initial deposit when starting your account. Otherwise, you wouldn’t be permitted to open it.
In Metrobank, a standard Debit/ATM Card Savings Account requires a PHP 2,000 initial deposit. For a regular Metrobank Checking account, the minimum initial deposit is PHP 10,000. In BPI, the initial deposit amount is even smaller— PHP 500 for a BPI Direct Express Teller Savings Account. The same goes for a basic ATM Savings accounts in Landbank, Security Bank, and DBP.
If you’re just starting to build your savings, opening a basic savings account would work best for you. However, if you want to open a new bank account for a lump sum you have, you can open an Advance Savings account in your bank of choice. While the initial deposit for advanced accounts may be higher, you’re guaranteed a higher interest rate if you meet the minimum balance to earn interest.
Fall Below Fee
A fall below fee is the administrative fee charged to your account when your balance falls below the minimum average balance. It usually reflects in your statement as SC— short credit. In almost all banks in the Philippines, such as BDO, BPI, and Metrobank, the fall below fee is between PHP 300 to PHP 500. It may seem small, but accumulated over time, your fall below fees could rack up to thousands of pesos. To avoid paying such fees, you must always make sure that your account meets at least its minimum maintaining balance.
Rewards / Perks
If you meet specific criteria, you may be able to get certain rewards or perks, care of your bank of choice. You should consider this when choosing the best bank for your intended use.
For example, BDO offers various tiers of reward cards with different features for account holders, with each level having more perks and privileges to unlock. The Emerald, Sapphire, and Diamond levels all require a particular type of credit card PHP account, as well as a minimum maintaining balance of at least PHP 100,000 to 5,000,000. You can earn points when purchasing from reward partners. Likewise, you can use the points you’ve accumulated to pay for purchases at any SM Store branch, the SM Hypermarket, and other SM Establishments and partners.
HSBC also has an incredible list of offers available for people who own an HSBC Advance Bank Account. If you get this type of account, you can get exclusive offers and discounts at over 27,000 establishments from all over the world.
There are a lot of rewards and perks to unlock with every bank account you have, and you’ll have even more privileges if you save and maintain your account well. Look through the perks included in your bank account and determine how you can maximize them to get the best rewards!
How Do I Choose the Best Bank Account for me?
There are various things to consider when choosing the best type of bank account for yourself. These factors depend on what your income is and how you usually deal with the money you have. To help you have an idea of what type of bank account to select, here’s a quick guide to choosing the best kind of bank account for your use:
Best Bank Account for Kids
If you’re planning to set up an account for your kids, it’s best to start with a starter account instead of immediately opting for a standard account. Additionally, keep in mind that some banks offer exclusive perks for kid accounts.
When selecting a bank account for your kids, take into consideration the age limit allowed for the account, the initial deposit requirement, the minimum maintaining balance, and the maintaining balance required to earn interest.
There are plenty of other special perks that come with kiddie accounts. Just look for the one that makes the most sense to you and your saving habits to start your selection.
Best Bank Account for OFW
If you’re an Overseas Filipino Worker (OFW) and you want to open a bank account in the Philippines, some bank account types are made especially for you. As much as possible, try to look for a bank account that offers perks for OFWs, like a zero maintaining balance or those that offer higher interest rates. Some of the best OFW savings account you can find nowadays are the following: BDO Kabayan Savings, BPI Pamana Padala, Chinabank Overseas Kababayan Savings, Metrobank OFW Savings, and PNB OFW Savings.
Best Bank Account for Couples
For couples, the key to getting a good bank account is researching the best joint account options you can find. When looking for an ideal joint bank account, take into consideration the minimum initial deposit, maintaining balance, and the interest rate. BDO, for example, only requires PHP 5,000 minimum initial deposit for a Peso Passbook Savings account.
You should also decide if you want the OR or AND option when choosing a joint bank account. An OR account allows you to withdraw money with the other’s consent. An AND account, on the other hand, will require both account holders to go to the bank to affix their signatures personally.
Best Bank Account for Students
For students, some of the best features you should look out for when finding the right bank account is its maintaining balance. Not many students earn their own money. With the right bank account, however, students can enjoy the convenience of financial mobility without fees or penalties for failing to meet the minimum maintaining balance.
If possible, find bank accounts that have higher interest rates. While it may not matter much for students, there’s nothing wrong with the additional perk of a good interest gain on the occasion that you maintain a good balance on your account.
Best Bank Account for Freelancers
Freelancers need to find an account that best fits the nature of their work. When it comes to the primary considerations of finding bank accounts for freelancers in the Philippines, choose one with an easy application process, a relatively low maintaining balance, and low transaction fee when it comes to transfers, withdrawal fees. You may also consider the availability of ATMs to save on cross-transactional fees. It would also be helpful to choose a bank with an online banking option to make money managing easier for you.
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