Banking might be a confusing task for you but is not that difficult. For most of us the first introduction to banking system is through a bank savings account and then various other banking products come into our knowledge with due course of time. Another banking product that is very similar to savings product is Current Account.
It is possible for an average individual to confuse between savings and current accounts, in this article, we will talk about the differences between savings and current account.
What is a Savings Account?
A saving account is the most common type of bank account, where you get interest on balance maintained in the account. Account holders can add or withdraw money from their account easily.
An individual can hold more than two or more savings accounts with different banks. Two or more individuals can open joint savings account.
Features of a savings account
- You can open a savings account with any public or private sector bank.
- There are no limits as such for the number of savings account you can open.
- Savings account promote money saving habits as bank pays interest on the amount of money deposited in the account. Interest rate may differ from bank to bank and may be payable after a fixed tenure.
- There are no restrictions on when and how you can withdraw money. You can withdraw a limited sum of money, which is fixed for each day, at any time without any worries.
- Depending on your bank account, you may need to maintain an average minimum every month.
What is a Current account?
A current account is usually preferable for a business or an organization. The current account has many benefits and offers ease of operation to an organization.
Features of a current account
- An organization, company, HUF or a freelancer can open a current account in any government or private bank.
- The current account has no limit on daily transactions. But some banks may charge extra fee for various transactions. However, these fees are predetermined and are available in written also.
- Organizations and other entities can enjoy the benefits of overdraft facility depending on their credit history.
- Furthermore, the current accounts allow the business owners to track the growth of their business.
A current account offers many benefits, and all these benefits help in running of business smoothly and easily. However, it must be noted that current accounts are most suitable for business entities only as they offer no interest on money deposited.
Difference between Savings and Current Account
Here is a short differentiation between the two kinds of accounts which will help you to decide, what type of account would be better for you.
- Limited Withdrawals: Savings account allows the account holder to withdraw only a limited amount every day. On the other hand, a current account has no limits on withdrawals.
- No interest: A saving account pays interest on the average balance maintained in the account. Current accounts, on the other hand, have no such facility.
- Overdraft: There is no feature of “overdraft” in savings accounts. Current accounts have the feature of overdrafts and allow you to enjoy the benefits depending on your banking history.
- Minimum balance maintenance: The minimum account balance to be maintained in a savings bank account is extremely low in comparison to that of current accounts. Furthermore, there are only minimal fee deductions for non-maintenance. However, the minimum amount of funds to be maintained in a current account is very high, and the bank will charge high fees, in case of non-maintenance of balance.
- Withdrawals: A savings account holder may not be able to withdraw money after exhausting the stipulated limit, though some banks may permit additional withdrawal with some fees. However, there are no such issues with a current account.
- Number of Users: A savings account usually has only one signatory, who can initiate transactions in his/her name alone. However, a current account can have multiple signatories, and an amount limit can be assigned to each signatory's authority.
Which one is better?
That said, the question of choice of the accounts arises. Which account should you choose? And what parameters for your choice should you consider?
To be honest, the choice will depend on the nature of your use. The accounts you hold or choose to hold will also depend on the nature of your work. While current accounts offer a vast array of benefits, those benefits hardly matter to a person with a fixed income.
An individual with fixed income will want to save money and earn some interest over it, and a savings account will offer him that feature. However, for an enterprise, a business requires initiating multiple transactions in a day. And there is no limit on the amount of money that may be needed for the day to day requirements.
And it is because of these reasons; a current account is the best option for a business. Furthermore, a company may be run by a proprietor or have multiple partners who need to follow through various transactions. A current account can have multiple signatories, thereby helping the business to run smoothly.