“Savings account or current account, stuck! What do I pick?” This is how you probably cook mess out of your grey matter standing in front of the ATM.
But I appreciate you that you have eventually decided to beat some useful knowledge into your brain about it. Kudos!
Here we shall walk you through the ins, outs, differences, and benefits of savings account as well as current account.
So, you shall be able to tap on the right one with no dot of confusion.
Both types of accounts are facilitated by every bank such as Kotak, Bank of Baroda, State Bank of India, ICICI and many more, provided you are eligible to hold it.
No further doodling, let’s get into the knowledge maze!
Savings Account: A brief overview
As the term shows, this type of account is curated with the purpose of doing some savings.
There are specific kinds for students, minors, for retiring folks, and so forth.
Such bank account come with certain restrictions to enable proper stashing of funds.
With the said account, one cannot carry out business or other regular transactions.
While it also requires some prefixed amount of money to keep it operational and can be opened mutually or individually.
A person is enabled a limited number of transactions to maintain the saved wealth.
Banks accrue 4-6% of interest rate on the savings of the person, and this becomes a real incentive to hog more into the account.
Current Account: A brief overview
This type of account on the contrary is meant to perform frequent transactions and hence stands more suitable to businesses, companies, enterprises, public organizations and more.
While one gets the benefit of unlimited transactions and high liquidity here, but the deposits do not earn any interest.
The threshold amount of maintaining this account is quite higher compared to the savings account.
A person holding a current account may overdraw the funds, which is otherwise in the former one.
Difference & Benefits of Savings Account and Current Account
So, now as we have got the basic knowledge and overview of both types of bank accounts, we move to demarcate the both.
Since, they serve different objectives.
Thus, they bear different outcomes, pros, and processes.
Purpose of the Accounts
In savings account, the holder has the intent of saving their funds and enjoying the interest credited by the government on it.
While in current account, the holder anticipates frequent money transactions for business or other reasons.
Eligibility Factor
As per the guidelines, following individuals can open savings account in bank:
- Resident folks (individual or joint)
- Foreign nationals living in India (residency period should be >180 days and must have a valid visa, FRRO certificate, i.e., Foreign Region Registration Office, residential permit and valid passport)
- Minors who are >10 years of age can get a minor account
- Hindu undivided families
As per the guidelines, following can open a regular current account in bank:
- Partnership
- Sole proprietorship
- Resident individual
- Limited company
- Trust
- Clubs/ society/ associations
- Foreign national resorting in India
- Limited liability partnership
Interest Aspect
Banks credit 4-6% interest on funds in saving accounts, which is a benefit indeed associated with it.
However, the case is otherwise in current accounts, which do not offer any interest on deposits.
Also Read: What are the Eligibility Criteria for an IPO and Requirements for a company to go public?
Threshold Balance of the Accounts
To open a savings or current bank account, a holder has to deposit a prefixed minimum amount in it.
The threshold balance, though, is pretty low in savings account as compared to current account.
Overdraft Facility
An account shows overdraft when a holder withdraws more money than the deposits in it.
With savings account, banks do not render or permit any overdraft facility.
Whereas you may reap the benefits of overdrawing in current account since it is already provided by the banks.
This is definitely a perk which can aid in the holder in times of dire financial need or distress in your business transactions.
Transactions per Month
Savings account holders are allowed really few transactions per month, which is about 3-5 and no more.
Since the main aim here is to save money while procuring interest benefits on the deposits.
While with current account, one can make unlimited transactions and offers high liquidity to the funds.
Ideal Holder for Both Accounts
Savings account are designed for savings purposes, hence fit those who earn a regular income.
Or folks bearing any short-range fiscal goals such as education, wedding, vacation, etc can also secure their funds in savings account which may increase a bit with interest.
On the other hand, current account is best for those who have to perform frequent business or financial transactions.
This makes it suitable for business firms, sole proprietors, enterprises, public firms, clubs, societies and so on.
Appropriateness
Suitability is an indispensable factor while you are considering of opening a bank account.
Both savings account proffer distinct purposes and benefits, which you need to weigh on the scale of your requirements.
Know your aim in getting an account, and pick the one which suits your needs.
That is, if your chief goal is to secure and hog savings, then go for savings account.
However, if you intend to make regular business transactions, your choice should be current account.
Bottom Line
So far, we batted around grasping what are savings and current bank account.
We discussed the differences between the two and their benefits in detail.
In a nutshell, savings account is meant for those wanting to save money and having steady income source.
While current account is fundamentally made to ease frequent transactions in businesses and firms.
The former type credits 4-6% interest on the deposits to promote savings, while there is no such incentive associated with the latter one.
Instead, current account offers high liquidity and unlimited transactions to the account holder.
So, as now you are fully informed of the savings and current account in detail, you may select it according to your needs.
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