Bank accounts, fees and your IBAN

Jure, 19, has started his first job. His bank offers three kinds of account and two packages, and its price list runs to six pages. Which account does he need, and what will it really cost him?

Three accounts, three jobs

A current account is for money that comes and goes: your salary or pension comes in, and card payments and bills go out. It usually pays little or no interest and often has a monthly fee. In Slovenia it is called a transakcijski račun.

A savings account pays interest and keeps money apart from daily spending. You can usually reach the money quickly, so it suits money for unexpected bills and short-term goals.

A term deposit locks money for a fixed period, such as 6, 12 or 24 months, at a known rate. If you take the money out early, you usually lose most of the interest.

Any of these can be a joint account with two or more holders. Often each holder can withdraw everything alone, and all of them may owe any debt on it. That works well for shared bills, but only between people who trust each other fully.

What an account really costs

Typical fees include a monthly package fee, a card fee, withdrawals at other banks’ ATMs, paper statements, transfers outside Europe, currency exchange, and overdraft interest and fees. EU law helps you compare. Before you sign, the bank must give you a standard fee information document. Every year it must send a statement of the fees you paid. Each EU country must have at least one free comparison website, and banks must help you switch to another bank.

Overdrafts are loans

An overdraft means your balance goes below zero and the bank lends you the difference. An arranged overdraft has a limit and an interest rate agreed in advance. Going past the limit, or below zero without any agreement, is unarranged. It usually costs higher interest, fixed fees, or both.

Fixed fees make short overdrafts very expensive. Say you are €400 below zero for 15 days:

• Arranged, at 9.5% a year: 400 × 0.095 × 15 ÷ 365 = €1.56.
• Unarranged, with a €10 fee plus 15% a year: 400 × 0.15 × 15 ÷ 365 = €2.47, plus €10 = €12.47.
• As a yearly rate: 12.47 ÷ 400 × 365 ÷ 15 ≈ 76%.

Your IBAN, and your right to an account

An IBAN is the international number of your account. It starts with a country code and two check digits, followed by the national account number. A Slovenian IBAN has 19 characters, for example SI56 1910 0000 0123 438. German IBANs have 22 characters and French ones 27.

The check digits catch most typing mistakes. But a valid IBAN does not prove who owns the account. The next lesson shows how to check the name.

In the EU, everyone legally resident has the right to a basic payment account. This explicitly includes people with no fixed address and asylum seekers. It must let you pay money in, withdraw cash, make transfers and pay by card, for free or a reasonable fee. A bank may refuse only on narrow grounds, for example money-laundering checks.