The world of banking, finance and the money market can be confusing at times, with the innumerable types of loans, bank accounts, interest rates, minimum balances and so on. It is a never-ending list of requirements that can get a little intimidating for someone new or not so experienced with the field.
The banking system in the UAE offers numerous kinds of bank accounts that an individual can open, each serving a different purpose. The below information will help you choose exactly which account would be best for your needs and provide you with all the necessary information to open a bank account.
Broadly, bank accounts can be divided into two categories- personal and corporate bank accounts. The former is used for one’s personal purposes whereas the latter is designed to suit a businessman who deals with corporate matters, as a personal cannot be used for such commercial purposes. Therefore, for such purposes, for instance, if you are running a company, you need to open a business account for it.
When opening a bank account, the customer is given a choice from amongst a variety of types of accounts. The most imp as follows:
A current account is used for financial transactions that take place daily or for frequent money transfers. The holder of a current account typically gets a debit card and a chequebook and may even get a credit card, provided he/she is a resident of the UAE itself. Such accounts can be maintained in several currencies, like USD, GBP and Euro, along with AED. They can also be used to transfer wages and usually, the process of registering for a current account takes between 2-3 business days.
A corporate bank account would definitely be a current account whereas a personal account can be both current as well as a saving account. A current account in the UAE can typically be divided into standard current accounts and current accounts with additional benefits. The former offers the basic functions that are mentioned above and the latter are those types of current accounts that offer the standard functions along with some additional benefits, like travel insurance, etc.
It is important to note that there are certain situations where a current account can be opened for personal purposes as well. In such cases, one option is to open either a salaried current account or a special current personal account. The salaried current account would be the account where your monthly salary would be transferred to and the special current personal account would be useful in case you’re a business owner receiving dividends on your shares. This special account requires a certain minimum balance to be maintained but it gives the holder the freedom to transfer funds whenever they deem fit, thereby negating the need to do it every month.
A savings account is usually opened for investments, long-term and short-term savings or to save money for investing further. The eligibility criteria for opening a savings account in the UAE are not as stringent as that of a current account. Most banks allow for a savings account to be opened by both, UAE and non-UAE residents and usually require a copy of the passport, visa and salary certificate or reference letter, as the eligibility documents.
The savings account interest rates are higher than those of the current account, however, these accounts may have limited access to funds and may even apply a penalty upon withdrawal. A savings account also takes about 3-4 business days to open and just like a current account, it can be opened in multiple currencies, such as USD, Euros, Pounds sterling, along with AED.
Further, as already mentioned, a savings account can also be opened for wages and salary transfers. A savings account also requires a lesser minimum balance to be maintained in comparison to current accounts.
- Business Account
A business account is a corporate account that gives you easy accessibility to your funds at all times. On top of that, it has added advantages that a corporate or a business might require, such as, a low minimum balance requirement and a multitude of local and international currencies to choose from. Generally, it’s deemed necessary to attend a face-to-face meeting with the bankers in order for them to be convinced enough to offer you the business account since it does have superior benefits compared to most other accounts.
The amount of time it takes to get the account set up and functionality depends on the bank you’ve chosen and the type of business you have. In the Free Zones and with locally registered Limited Liability Companies, it might only take 2-4 weeks including the face-to-face meeting while it might take comparatively longer in other circumstances. It is advisable to confirm the documents needed before going to the bank. Here’s a list of documents you would need, however, note that every bank will have its own protocols and requirements:
- The application form;
- A valid passport or any other government ID of the owner and all shareholders;
- The Registration Certificate of the Company and trade license;
- The share certificates of all shareholders;
- The Memorandum and Articles of Association of the Company;
- The minutes of the Board meeting wherein the opening of the business account was decided upon.
- Investment Account
An investment account is an intra-bank account that generally offers a higher rate of interest than current or savings account, however, access to funds in such accounts may be limited or unavailable for a certain amount of time. Therefore, it is usually not recommended to go for these accounts if you’re someone who needs regular access to funds.
Such accounts can only be opened only after entering into an agreement with the concerned bank. The term ranges from 1-5 years and can even go up to 10 years or more. This kind of agreement would entail the transfer of a certain sum of money from your end into your newly opened investment account and the bank is the one who manages your portfolio and makes investments in numerous financial instruments. The minimum amount of money to be transferred/invested varies from bank to bank. The usual rate of return from such investments typically varies between 3-7% per annum.
- Offshore Bank Account
Of late, there has been a comparatively newer practice on the rise; banking activities being carried out from remote locations far away from the location one resides in. An offshore bank account allows for and facilitates an entity’s global financial commitments. Financial institutions in the UAE haven’t placed many restrictions on offshore banking. For instance, in Dubai, after opening an offshore account, one can freely import as well as export funds and need not make currency declarations while getting into different territories. This permits the movement of funds in the desired form.
Usually, the following documents are required by the bank to start an offshore bank account:
- In case the individual is a shareholder, a copy of his/her passport with the stamp of entry in the United Arab Emirates.
- In all other cases, a copy of the main pages of the MD passport.
- The License of his/her Company.
Some banks may require certain other documents as well but most importantly, the procedure to open an offshore bank account varies from country to country and bank to bank.
Fixed deposits are mainly for those who would like to save some amount of money for further investment or simply, as savings. They are also called time deposits and can be done for varying durations and for varying amounts as well. However, there is a minimum amount as well as a minimum duration that every bank prescribes for a fixed deposit.
Essentially, Fixed Deposits preserve the principal amount while also earning a fixed interest on the principal for a predetermined tenure. Most banks offer a wide range of tenures and amount to choose from and the rate of interest offered on a fixed deposit is often higher than both current account and savings account, but again, varies from bank to bank.
Conclusion
Now that we’ve provided you with information on the various types of bank accounts that you can open staying in the United Arab Emirates, we would like to conclude by giving you a word of advice, which is that, it is always wise to open a bank account, considering your preferences, availability of funds at that moment, the objective behind opening the account and only finalize the account you want to open based on the return it provides and its advantages. Every account has its own benefits and perks as also its own disadvantages. Never forget to compare the rate of return from numerous banks and don’t just settle on one!
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