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A person wants to open a bank account, once he starts earning from a job or after starting a business. Having a bank account is essential in the modern age and many times they wonder which one is the right option; to open a savings account or a current account. The choice of account depends on their banking needs.
A saving bank account is a basic type of bank account that allows you to deposit money, keeping it safe, and withdraw it whenever necessary. These accounts are offered by most banks and financial institutions and pay interest on deposits. The interest on saving bank deposits is different for each bank. If you keep cash at home you may be tempted to spend it but keeping it in a savings bank account will help you in reaching nearer to your long-term goals.
A current account is used by businessmen who have a large number of transactions to make, which are deposits and withdrawals. In India, the current account can be opened by depositing between Rs. 5000 to Rs. 25,000. In the current account, the amount can be deposited and withdrawn anytime and is most suitable for making payments to creditors using cheques.
Differences between Saving bank and Current account-
A savings bank is designed to promote savings. This is meant for individuals who deposit their salaries in the account and can be used for paying household and personal bills.
A current account is intended for people who do business like shopkeepers, traders, and companies where the volume of transactions is very high.
The current account is opened for business purposes so the money deposited in this account doesn’t earn any interest. It is mainly for the easy facilitation of payments i.e. to accept and send payments.
A savings account offers interest on the money deposited. The interest may not be very high and may range between 3.5% to 6% per annum and is not sufficient to cover inflation. The interest may be credited to your account quarterly or half-yearly.
The savings bank account facility provided by a bank does put a limit on the number of transactions an account holder can carry out in a month and the limit may be between 3 to 5 transactions every month.
The current account does not have any limits for the maximum number of transactions and serves the purpose of carrying out frequent transactions. This is required for business purposes where there is a need for multiple transactions.
Except in the case of zero balance accounts you need to keep a minimum balance in the account. The minimum balance is the amount of money that must be always there in your account to prevent it from deactivating.
In the savings accounts, the minimum balance required is low but in the current account, a higher amount of minimum balance is required to be kept.
When you withdraw more money from the account than is actually there, it is called overdrawn. In business, there are lots of transactions every day and sometimes there is a mismatch between deposits and payments and there may be a shortage of funds to make payments. To tide over this situation and prevent the cheques from being dishonored the bank provides an overdraft facility. Current accounts offer overdraft facilities while saving accounts do not.
The current account has many variants and some of them are-
- Premium current account.
- Standard current account.
- Packaged current account.
- Foreign currency account.
- Simple cash account.
The list of saving bank accounts offered by different banks are-
- Regular savings account.
- Zero balance or basic savings account.
- Women’s savings account.
- Kids’ savings account.
- Senior citizens savings account.
- Family savings account.
- Salary based savings account.
The current account and saving account are meant for customers having different requirements. A businessman opens a current account due to the liquidity and the number of transactions he requires to carry out while an individual opens a savings account when he doesn’t want to carry a large number of transactions and favors receiving interest. It is up to an individual to compare the facilities and decide which account he wants according to his banking requirements.