“What is a non-transaction account?” is a common question we receive from individuals in the following situations:
- Opening an account with a fixed-term deposit or certificate of deposit (CD)
- Stepping into private banking for the first time
- Trying to send payments to suppliers or contractors
In these three cases, non-transaction accounts can have very different implications. Likewise, depending on the foreign financial institution you are opening with, the account types may vary.
We’ll explore each of these groups below and share an important warning to consider before opening a non-transactional account.
With the right information, you can navigate whether a non-transaction account is the right choice as you continue your hunt for the best offshore accounts available.
Feel free to jump ahead to the areas most relevant to you by using the table of contents below.
Table of Contents
- What is Non-Transactional Banking?
- What is an Example of a Non-Transaction Account?
- Important Warning: Non-Transaction Accounts
What is Non-Transactional Banking?
In order to know whether a non-transactional bank account is right for you, it’s important to know what they are and how they compare to transaction accounts.
Non-Transaction Meaning
Non-transactional banking refers to banking with limited incoming and outgoing transactions. Bank accounts that support non-transactional banking include savings accounts, money market accounts, fixed deposits, certificates of deposit, investment accounts, private banking accounts, etc. These accounts are sometimes also referred to as non-payment accounts.
In certain instances, incoming transactions or specific forms of payment (e.g. ACH) might be blocked completely from these accounts (more below). And, outgoing transactions exceeding preset account limits may result in high fees being charged by the bank or financial institution.
Is a Private Bank Account a Non-Transaction Account?
Private bank accounts are often referred to as a type of non-transactional banking as well. This is because private bank accounts are not intended to support frequent transactions. Instead, the purpose of private banking is normally to invest funds over the long term.
One important point about private banking is that private banks typically do not restrict incoming transactions. In fact, most private banks won’t even charge any fees on any incoming transactions (while retail banks do). That said, most private banks do impose strict limits on the number of outgoing transactions each month.
What is the Difference Between Transaction Accounts and Non-Transaction Accounts?
The main difference between transaction accounts and non-transaction accounts is that transaction accounts can send and receive money freely while non-transaction accounts can only receive a limited number of transactions each month. Both account types serve specific goals, so it’s important to open the account that’s right for you.
What is a Non-Payment Account?
A non-payment account is another name for a non-transaction account. It simply refers to an account that cannot receive payments. We cover this in more detail in the R20 Accounts section below.
What is an Example of a Non-Transaction Account?
The three situations where questions arise about non-transaction accounts typically occur when someone is considering fixed deposits, private banking, or sending payments.
With this in mind, here are several examples of non-transaction accounts that fit into these three categories:
- Fixed term deposit accounts
- Money market deposit accounts
- Savings deposit account
- Retirement investment accounts
- Private bank account
That said, if you’re asking about non-transaction accounts because you’re having problems sending payments to contractors or suppliers in the United States, it may be because you are trying to send funds to an R20 Non-Transaction Account. More on this below.
What is an R20 Non-Transaction Account?
Don’t worry, this isn’t as technical as it sounds. An R20 non-transaction account is just an industry term for a “non-transaction account.” That’s it.
The special “R20” distinction is due to the ACH return code that you receive if you try sending money to an R20 account. Instead of the transaction being successful, you’ll receive a notification that you tried to pay an R20 non-transaction account and it was unsuccessful.
If you receive an R20 notification, you’ll need to contact the party you’re trying to pay and ask for a different account.
Important Warning: Non-Transaction Accounts
If you are considering opening a non-transaction account, it’s crucial to understand all of the fees associated with the account before opening one.
The reason for this is simple. If you are opening a savings account, money market account, or fixed-term deposit, you might need to withdraw your funds ahead of the permitted time frame. And this can trigger penalty fees.
If you withdraw funds before the agreed-upon date, the bank will likely penalize you (charge fees) for doing so. The fees that banks charge for accessing non-transaction accounts ahead of schedule can be very high. For example, some banks charge up to 1% for early withdrawals.
So, if you are considering opening a non-transaction account, make sure to look into all of the related fees first.
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