Having a bank account is essential these days. Gone are the days when people would exclusively use cash, or hide their savings under mattresses and in locked cabinets. With economic globalisation and the advent of e-commerce everyone needs a bank account, as often the most convenient way to pay for services is through your bank. Bank accounts also offer a fuss free way to keep track of all your money, and help you save if you are so inclined. But the process of opening a bank account can seem daunting for those who have never done it before, due to the financial jargon attached to it. So, here’s what you need to know, in simple terms, before you open a bank account.
For minors and students:
After completing this process, your bank will contact you to let you know that your account is is being processed. In the span of 1-2 days most banks will notify you that your account has been opened. A further 2 weeks will be required to receive your cheque book. The minimum amount required to open an account varies from bank to bank, but per the State Bank of Pakistan (SBP) is Rs. 1, 000. And, for low income individuals, in order to be financially inclusive the SBP has mandated that banks offer ‘Asaan’ accounts which can be opened with a minimal deposit of Rs. 100. However, ‘Asaan’ accounts do not provide the all same amenities as a current account, for instance, they do not provide a cheque book and it has to be separately requested.
Basic Bank Account:
This type of account is easy to open, even though it comes with some limitations. It does not require users to have a large sum as a minimum balance, only a minimum deposit to open the account. However, per the SBP, if the account balance remains zero for six months consecutively then the account is liable to be closed. And, later in time if someone’s financial situation allows it they can convert this type of account into a different account like a current or saving account by requesting their bank.
Current accounts are extremely useful because they are not subject to the same restrictions as a basic bank account. They provide all the necessary amenities like internet banking, no deposit restrictions etc. However, current accounts have a minimum balance requirement, and the bank will charge you a fee if your balance falls below that amount. The amount varies from bank to bank but the minimum balance can range from Rs. 5,000 – Rs. 25, 000. Unless, the current account is an ‘Asaan’ account, in which case the minimum balance requirement is waived.
Savings accounts are great for those on a fixed income who want to maximise the value of their money. Most banks offer at least one type of savings account, without a minimum balance requirement. And, unlike a fixed term investment account the funds in a savings account are liquid (they can be accessed at any time). However, banks usually pay the profit every 6 months, and the rate at which you profit is much lower than that of an investment account.
Foreign Currency Account:
This type of account is used mostly by foreign/dual nationals, companies, charities or those who regularly have to transfer money abroad.
Term Deposit Accounts:
Fixed /term deposit accounts are for those who have a certain amount of capital that they are looking to profit from. However, because the money cannot be withdrawn until the term is over it is not flexible like a savings account, hence it is only for those individuals who can afford to park a certain amount of money in this amount without needing to make use of it. The rate of return for this type of amount is much higher than that of a savings account.