When you visit a bank to open an account, you get two alternatives – a Savings Account or a Current Account. To pick the option that best serves your needs, you must first be aware of the concepts behind each one of them and have a clear understanding of their underlying differences.
A Savings Account, as the name suggests, offers you the facility to park your monthly savings. Usually offered by major banks, a Savings Account helps you access and withdraw your money as and when required, thus addressing your liquidity needs.
In most cases, the Savings Account offers additional facilities such as ATM cum Debit Card, Daily Interest, Mobile Banking, Internet Banking, and Online Money Transfer.
The following entities can open and hold a Savings Account:
Agencies or Institutions registered under the Societies Registration Act, 1860
In most cases, the bank does not levy any fee on this account and instead offers interest on the daily balance.
A Current Account is essentially a deposit account that is designed to assist businesses and organisations who need to undertake frequent monetary transactions. Such an account often entails numerous facilities such as – an Unlimited number of deposits and withdrawals, payment on standing instructions, direct debit, overdraft facility, internet banking, etc. A Current Account is also referred to as a Transactional Account or a Checking Account based on the functionality it offers.
The following entities can open and hold a Savings Account –
Most commercial banks levy an account maintenance charge for a Current Account, owing to the plethora of facilities that this type of account provides.
As we have come to understand by now, both Savings Account and Current Account serve distinct purposes. Let us try and explore some other striking differences between the two account types:
Savings Account usually acts as a deposit account wherein a user can park their savings, and use the same to fulfil one or more financial obligations at a future point in time.
A Current Account, on the other hand, is a transactional account which facilitates day to day monetary transactions, usually for a business enterprise.
Savings Accounts are offered to encourage the habit of savings amongst the people.
A Current Account is offered to assist frequent business transactions with added ease.
Saving Accounts are best suited for salaried individuals as well as entities such as clubs and trusts who are in need of a trustworthy place to keep aside their regular savings.
On the contrary, Current Accounts suit the needs of business entities, institutions, government departments, etc. as they are required to undertake a significant number of transactions on a daily basis.
In most cases, the number of daily and monthly transactions that can be carried out using a Savings Account is fixed. When exceeded, the additional transactions might incur specific charges.
There is absolutely no restriction on the frequency of transactions with respect to a Current Account.
The user can earn an interest ranging anywhere between 4 to 8% on the amount in their Savings Account, depending on the bank with which they have opened the account.
A Current Account does not bear any interest, due to obvious reasons.
With a Savings Account, a user can expect amenities such as Debit cum ATM Card, Cheque Book, and Passbook. Besides these, a Savings Account is also accompanied by mobile and internet banking services as well as online transfer facilities.
One of the most imperative conveniences offered by a Current Account is the Overdraft Facility which helps businesses carry out their transactions in a rather seamless manner.
In a vast majority of cases, Opening a Savings Account does not require any significant opening balance.
On the other hand, to open a Current Account, the user is required to have substantially high opening balance.
We hope that you now have e clear picture in mind regarding the uses and the objectives of a Savings Account and those of a Current Account. While one is most suited for individuals who wish to accumulate savings, the other is meant for businesses who are required to process numerous transactions on a regular basis. Both Savings and Current Accounts come with their own set of benefits and facilities, however, as an additional advantage, the money lying in Savings Accounts generates a revenue, albeit taxable, in the form of interest earned.
Also Read: 7 Benefits of Running a Current Account
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