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Cheque Savings Credit explained

Cheque savings credit imageFor most of our purchases these days, we might not even get asked whether we want to use cheque, savings or credit. PayWave and other contactless payment tech has meant we usually just tap and go in silence. But what will your response be when the total tops that $100 mark? What’s your go-to?

For most of us, we simply select the same option we always have, because someone told us once that was the right option. We’ve broken down the differences between cheque, savings and credit so you can start making an informed choice at the check-out.

Cheque, Savings or Credit?

Each EFTPOS terminal in Australia has three buttons on it when it comes to account selection. Here’s what it means if you press each one:

  • Credit – You use this button if you’re paying using a Credit Card, or you have a Debit card that can be used like a credit card. Your debit card has to be linked to an account from which to draw your own funds.
  • Cheque – This button will cause money to be withdrawn from your transactional, or everyday banking account.
  • Savings –Pressing savings will mean money will be taken from your savings account, if you have one linked to your Cheque (everyday) account. If no account is linked, funds will simply be taken from your Cheque account.

Pros and Cons of Cheque, Savings and Credit

Option Pros Cons
  • Paying with credit means you don’t have to worry about having access to funds
  • Your credit provider covers you for chargeback protection
  • Banks and card providers monitor your account closely to detect fraud
  • Credit surcharges may apply to your transaction
  • Merchants may enforce a minimum transaction threshold
  • Your credit card debt will need to be repaid to avoid paying interest on purchases
  • Transactions aren’t processed immediately
  • Transactions are processed straight away
  • No money in your account? No purchase. This also means no debt.
  • No debt means no interest to pay
  • Can be confusing – just remember, if you don’t have a savings account linked, funds will come from your cheque account anyway
  • If you’re out of money, you can’t complete a purchase
  • You may not enjoy the same level of fraud protection if your card isn’t a debit card through Visa or Mastercard

It’s important to remember that selecting the right account for the way you spend is key. Different accounts will offer different fee structures based on the number of EFTPOS transactions you make in a given month.

For example, some everyday/transactional/cheque accounts, like Greater Bank’s Ultimate Access offer unlimited transactions each month, so long as you deposit >$2,000 in the same month (like your salary). If you’re a heavy card user, having no fee bank accounts can be a great way to help save money.

Researching and comparing the right bank account for you will help you improve your personal finances.

Does a contactless payment use cheque, savings or credit?

More and more of us are using contactless cards – it’s simple, safe and convenient! Aside from the fact that many of us are getting so used to using contactless we’re forgetting our card PIN, another issue is that many Aussies don’t know which account is being used when they use a contactless card at the check-out. Here’s how to think of it:

  • If your contactless card is a debit card, the funds used for your purchase will come from your transactional account or linked savings account.
  • If your contactless card is a credit card, money for your purchase will be drawn from your credit card account, even if there is also a transactional or savings account linked to your card.

Making yourself aware of the differences between pressing cheque, savings or credit will help you make better, more confident decisions when managing your money.

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