Types of financial products

Here is a basic overview of the types of financial products available in SA. Remember that the different banks and financial institutions have their own rules and benefits so make sure you do your research carefully before choosing a product.

Transactional products

Cheque account

Also called current or transactional account, this is for your salary to be paid into. This type of account is used for everyday banking such as making payments, debit orders etc. as well as shopping with a debit card.

You generally don’t earn interest on a transactional account, although some banks offer a savings pocket attached to the cheque account that does generate interest. Unlike a savings account, a cheque account can have an overdraft attached to it.

Savings products

Savings account

A basic savings account allows you to save and be able to access your money at any time.

Notice accounts

This type of account usually offers a better interest rate than a savings account but you can only access your money after a notice period. This notice period can range from 7 to 90 days depending on the account.

Fixed deposit

These accounts generally offer higher interest rates but you usually can’t access your money at all until the end of the fixed period. Some banks may allow you to access your funds early, however this can attract penalty fees.

Stokvel account

Some banks offer group savings accounts for stokvels and savings clubs.

Tax free savings

SARS allows you to deposit up to R33,000 per year in tax-free savings accounts and up to R500,000 in your lifetime, without paying tax on the interest you earn. If you deposit more than R33,000 in a year, you’ll pay a 40% penalty tax on the extra amount.

Retirement savings

  • Pension fund – You can only join a pension fund through your employer. When you retire you can withdraw a third of your pension as a lump sum (which is taxable) and you need to put the rest into an annuity that will pay you a monthly income.
  • Provident fund – Similarly to a pension, you join a provident fund through your employer. The difference is that you can take the whole of your retirement savings as a taxable lump sum when you retire.
  • Retirement annuity – You contribute to a retirement annuity independently of your employer. As with a pension, when you retire you can only take a third as a taxable lump sum and the rest needs to go into an annuity that will pay you a monthly income.
  • Preservation fund – If you move jobs and you don’t transfer your pension or provident fund savings to your new employer’s retirement fund, you can transfer your savings to a preservation fund.

Credit products

Personal loan

This is when you borrow an amount of money but it isn’t connected to an asset like with a home loan or vehicle finance.

Overdraft

An overdraft is a credit facility where you can keep drawing and making payments from your cheque account, even when there’s nothing left in it (and your account goes into negative figures).

Credit card

This is a revolving credit facility that lets you spend up to a personalised credit limit as and when you need to. It’s called ‘revolving’ because you use it, and then pay it back, and then use it again.

Store account

This is also a revolving credit facility, but you can only use your credit at a certain store or group of stores.

Vehicle finance

This is a finance agreement that is used specifically to buy a vehicle and is paid back over a certain term, normally between 12 and 72 months.

Home loan

This is a finance agreement that is used specifically to buy a house and is paid back over a certain term, normally between 20 and 30 years.

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