South Africa
Interest-bearing account
Savings & Budgeting

What is an interest-bearing account (and why do you need one)?

Saving is an important part of securing your financial future and building wealth, but did you know it’s not just about putting money aside? Instead of keeping your cash safely stashed away, if you want to effectively save, your money needs to grow.

Over time, prices increase as inflation becomes more, which means that you money is worth less. Having an account that pays you interest makes your hard-earned money work harder for you.

Interest-bearing account must-know

An interest-bearing account is a bank account that pays you in the form of interest for depositing (and keeping) your money in it. It’s a way to help you effectively save because your money grows based on a percentage of the amount in your account. Thereby helping you beat inflation by maintaining the purchasing power of your motesney.

Over the longer term, the process of earning interest on your savings plus earning interest on all the accumulated interest is called compounding interest, and it’s the key to building wealth.

Types of interest-bearing accounts

Different banks offer different types of interest-bearing accounts, and interest is paid either monthly or annually:  

  • A savings account helps you keep your money safe while providing you with an opportunity to earn interest. It’s an easy and convenient way to put money aside and give it a boost. Generally, you don’t need a large amount of money to start your savings journey; anyone can open one, and everyone should have one.
  •  High-yield savings accounts offer higher interest rates (i.e. percentage earned) based on certain terms.
    • Fixed notice deposit accounts function like a regular savings account, but your access/withdrawal is restricted for a specific agreed-upon investment period.
    • Similarly, money market accounts deliver higher interest but require a larger initial deposit.
    • The type of access influences how you earn interest, with interest tending to be higher on notice and maturity access accounts.
Immediate access account Notice access account Maturity access account
Immediate access to your funds. You must give notice (e.g.7, 32 days, etc.) before accessing funds. If you need to access your funds immediately, penalties may apply. You can access your funds at (end) maturity of term ranging from 1 - 60 months.
Often requires no minimum opening deposit. Additional deposits can be made. Often requires a small minimum opening deposit. Additional deposits can be made. Requires a lump sum deposit. No additional deposits can be made.
Interest is accrued daily and capitalised monthly. Interest is accrued daily and capitalised monthly. Often interest can be directed to pay-out to nominated transactional account on a monthly/quarterly/bi-annually/ annually basis or at maturity with the fixed deposit.
Tax is payable on interest earned. Tax is payable on interest earned. Tax is payable on interest earned.

The benefits of an interest-bearing account

  • No matter how small the amount (percentage) of interest earned, it adds to your savings amount.
  • You earn interest on interest.
  • It helps you grow your money to meet your savings goals.  
  • You have different options to choose from based on your needs.
  • Not only do you grow your money, but you keep it in a place you’ll be less tempted to dip into and spend it.

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