Cutting red tape on bank accounts

There is a growing general public awareness of the convenience of using bank accounts.

Increasingly, in Trinidad and Tobago, employees make payments of wages and salaries through the use of bank accounts that they require their employees to open, partly in a bid to improve the security of payroll transactions. In these circumstances, many account holders may have come to that status without first identifying and expressing their own needs for the facility.

The Central Bank in conjunction with the Ministry of Legal Affairs — Consumer Affairs Division, presents its Consumer Education on Banking Programme as a supplement to the product information that the banks do provide, much of which is provided within a competitive marketing context and with a focus on image and product selling. As a result, many consumers appear to remain ill-advised and ill-informed about banking services, what they offer, the most effective ways of using them and their cost. This document is designed to help consumers to better understand the use of bank deposit accounts.

What is The Value Of Holding A Deposit Account?
Whatever the manner in which consumers have decided to open bank deposit accounts, they may find it is valuable and worthwhile to hold one or more bank deposit accounts in the banking sector for a variety of reasons. These include:
* The convenience of paying bills — via through standing orders, cheques, ATM, debit cards or telephonic transfers;
* It is easier to manage the facility of managing your money — and exercising easier control over spending and savings habits;
* It is easy to the facility of receiving money conveniently — receiving wage, or salary or pension payments or payments by cheque from other persons;
* The enjoyment of security and low risk. — consumers may have less reason to carry large amounts of cash on their person while banks have an obligation to repay all moneys deposited with them. Risk of loss is minimised, and in the event of the outright failure of a bank or finance house, the deposit insurance system provides coverage on deposits up to $50,000.

What Types of Deposit Account Are There?
Banks in Trinidad and Tobago offer three broad classes of deposit accounts as well as several variations among these basic types. These account types are summarised below: Banks offer two basic types of deposit accounts.
1. Transactions-based savings and chequing accounts which are designed to facilitate everyday transactions such as paying bills and making purchases such as groceries and shopping.
2. Accounts for serious savers including savings accounts that pay high interest and limit the number of transactions and fixed deposit accounts.

What Do You Have to Do to Requirements for Opening a Deposit Account?
A deposit of $20 to $500 may be required to open an account depending on the type of account. The basic requirements for opening a deposit account are related to the issue of security. In order to establish your unique identity with the bank and minimise fraud, two forms of documentation are usually required. The first is an official identity document such as an electoral identity card, passport, or driving license. The second is usually a utility bill such as a telephone, electricity or water bill that helps to confirm your residence. Banks and financial institutions may have additional requirements or may vary the requirements depending on individual circumstances. The purpose of these forms of documentation is however to improve the level of security, your relationship with the bank and ensuring that the risks of fraud are minimised. Banks and financial institutions may have additional requirements or may vary the requirements depending on individual circumstances.

Are There Restrictions on Changing Suppliers and — Closing My Account?
If you close your accounts within three months of opening them you will be charged a fee.
For savings and checking accounts the early closure fee. Most banks assess a penalty fee for closing an account early, that is, within three (3) months of opening it. This fee may range from $250 to $5028.75
For in the case of a fixed deposit accounts the penalty fee for closing or breaking the deposit before the expiry of the term are:
* The fee for closing within three months ranges from $25 to $34.50, and in addition no interest will be credited to the account.
* Beyond three months and before the expiry of the term of the deposit, interest will be paid at the savings account rate and not at the agreed fixed deposit rate for the number of days the account had been held.
The existence of this penalty for early closure of an account therefore means that consumers should consider carefully their initial decision to select an account.

What Factors Are Important in Choosing an Account?
Consumers should consider a number of factors in deciding on the kind of account that they wish to use. These include: Your specific needs The cost involved in operating the account. The earnings or returns you may make from the account; and the commitment that you make in accepting the account

Do You Need An Account for Paying Bills etc? Your Deposit Account Needs
The use of a deposit account essentially addresses the need to facilitate transactions or to save, and consumers may have a choice among a number of savings accounts and chequing accounts to achieve these objectives.

If you need to facilitate the high volume of transactions this requirement may be satisfied through the use of a transactions-based savings account or a personal chequing account, both of which have the following characteristics: Both of these account types facilitate easy, flexible and unlimited access to your funds; The use of an ATM/debit card; the facility to access banks’ telephone services; and The facility to make automatic payments through the account; Often, there is no requirement to maintain a low or no requirements for holding a minimum balance.

What does it Cost to Operating a Deposit Account?
The principal cost associated with operating and maintaining a deposit account is a transaction charge for withdrawals. Most banks structure their charges as follows: in one or more of the following ways:
The creation of a specified number of transactions per period for which there are no additional charges. This number may be tied to the actual balance on the account at any given time.
The application of a fixed monthly fee that covers a specified number of free transactions, whether or not that many transactions are used.
The application of a specific charge is applied for each transaction over the specified limit.

In addition to the tran-saction/withdrawal charges, the banks also apply at least the following fees and charges for the operation of the account: Service charges for third party withdrawals from savings accounts; Service charges for withdrawals from passbook accounts without the presentation of the passbooks; In some cases, charges for the encashment of cheques drawn on another branch of the same bank or from another bank; Charges for establishing automatic payments through standing orders; Fees for the provision of certain statements such as a certificate of balances that may be required by an embassy; Charges for the closure of an account within three months of opening it; Dormant fee charges when an account is unused for more than six months a year, and also when such accounts have to be transferred to the Central Bank after being unused for 14 years; Fees for the replacement of lost passbooks, ATM cards or fixed deposit receipts.

Earnings
One of the benefits of holding a deposit account is the potential of earning interest on such accounts. Generally, more interest is earned when higher balances are maintained on the account and fewer transactions are undertaken. Thus high transaction savings accounts pay the lowest interest and does so on the minimum balance held during a quarter.
On the other hand, high interest savings accounts may pay interest on the daily balances, but may require higher minimum balances to be held. In some cases, as the balances held increase, the rate of interest paid may also increase. Fixed deposits usually pay the highest rates of interest on the agreed balance and if that sum is held for the entire term of the agreement.

How To Minimise the Cost of Operating Your Account?
1. Carefully select the account that best meets your transaction and/or savings needs. Take the time to have your bank explain their products, the services and conveniences they offer and the cost of operating them.
2. Shop around for the best available alternatives.
3. Make maximum use of ATM and debit cards and your own bank’s ATM machines.
4. Use of the telephone banking services of your bank may also result in lower transaction fees.
5. If you qualify for one of the special packages use such an account.
6. Select a service package that matches the manner in which you use our account. Review your needs from time to time to see if your package still satisfies them.
7. Maintaining certain minimum balances in your account may lead to lower fees and charges and earn higher interest.
A number of fees and charges apply with the operation of a deposit account. The following tips and suggestions will help you to reduce or minimise the burden of such charges on you.
8. Carefully select the account that best meets your transaction and/or savings needs. Take the time to have your bank explain their products, the services and conveniences they offer and the cost of operating them.
9. Shop around for the best available alternatives.
10. Make maximum use of ATM and debit cards. The cost of an ATM withdrawal from one of your own bank’s machines, or a debit transaction at a merchant may range from 50 to 65 cents, while withdrawals through a teller can cost as much as $4.
11. Use of the telephone banking services of your bank may also result in lower transaction fees.