You might have heard these two terms, current account and savings account. Generally, when you open an account in a bank for your personal use, it is a savings account. Then what is the current account and for which purpose, it is opened? What is the difference between current account and saving account? Let us explore the answer of these questions in this post.
What is Saving Account?
A savings account is the account held by some financial institution that allows you to deposit and withdraw the money, whenever required. You also earn interest on you deposit kept in the savings account.
Features of Savings Account
(a) Although, there is no restriction on the amount deposited or withdrawn; however, it is mandatory to keep a minimum balance in your savings account failing which may attract a penalty on the account holder. There are some financial institutions like Paytm Payments Bank, which is an exception to this rule.
(b) There accounts do not provide the overdraft facility.
(c) The account holder is entitled to get a fixed interest rate on the amount deposited in savings account.
(d) There is a limitation on daily/ monthly transactions in a savings bank account.
(e) Savings accountholder can avail the facilities of debit card, ATM card, online banking, etc.
(f) Any resident can open savings account but in case of a minor, this is operated by parents/ guardians of the child.
Some common types of savings accounts offered by the banks and financial institutions are as follows:
- Regular savings account
- Salary saving account
- Zero balance savings account
- Senior citizen’s savings account
- Children and minor savings account
What is Current Account?
A current account is a type of bank account which enables the account holder to do higher number of transactions on day to day basis. This type of account is generally used by the people who want to make transactions for the business purpose. The main difference in the current account and savings account is that the saving account is used for the purpose of saving the money while the current account is used to service the needs of the business. The current account does not give interest on the deposits as provided in the savings bank account.
Features of Current Bank Account
(a) The current accounts are typically used for regular transactions by businesses, trusts, associations, etc.
(b) Usually the banks or financial institutions does not provide any interest on the deposits of current bank account holders.
(c) An overdraft facility is available with this type of accounts.
(d) There is no limit on deposits or withdrawn with current accounts provided that you have sufficient balance available in your account.
(e) The minimum balance to be maintained in these type of accounts is higher than savings bank account. In case sufficient balance is not maintained, the penalty may be deducted from your account.
Based on the needs of firms, businessmen, trusts, etc., the current accounts are divided into following categories:
- Premium current account
- Standard current account
- Packaged current account
- Foreign current account
Difference Between Current Account and Saving Account
| Feature | Savings Account | Current Account |
| Interest | Interest is given on the deposit | No interest is provided |
| Overdraft Facility | No overdraft facility is available | Overdraft facility is available |
| Number of Transactions | There is a limit of daily/ monthly transactions made | No restriction on the daily/ monthly transactions |
| Minimum Balance | Low minimum balance to be maintained | Minimum balance to be maintained is higher as compared to that of savings bank account |
| Use | For savings purpose, for building emergency fund | For regular business transactions |
| Suitable for | For common people, salaried persons, professionals, senior citizens, etc. | Used by businessmen, firms, organizations, trusts, associations, etc. |
What is Overdraft Facility?
In this post, the term ‘overdraft’ is coming many times. The overdraft facility is provided to the current account holders, which enables them to withdraw more money than they actual have in their account. This is called overdrawing of the account.
Overdraft is nothing but a type of unsecured loan given by the bank to you for your business needs which you have to repay later on. The banks charge interest on the amount withdrawn. There is a pre decided limit depending on the financial capacity of the account holder beyond which he/she is not allowed to withdraw the money.
Conclusion
Most of us know about the savings account because almost everyone uses these type of accounts but few of us know about the current accounts. You should know the features and benefits of both type of accounts so that you can use the appropriate type of account as per your requirements. The savings account is used for savings purposes while the current account is used for business purposes. The benefit of savings account is that a fixed interest is provided on the deposits of these accounts while no interest is paid in the current account. One of the benefit of current account is that overdraft facility is available in these accounts while no such facility is available in savings account. Savings account is suitable for salaried people, professionals, senior citizens, etc. while the current account is useful for businessmen, firms, associations, trusts, etc. for business transactions. Now, as you know the common features and benefits of both type of accounts, you can choose the type of account as per your requirements.
