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Current Bank Account vs. Saving Bank Account Research Team | Posted On Wednesday, July 27,2011, 05:12 PM

Current Bank Account vs. Saving Bank Account



Current Bank Account vs. Saving Bank Account

Current Bank Account

Current account is an account with minimum amount of boundaries. Most individuals do not need this account, one need this account only if he makes a number of deposits and withdrawals in a single day and many of the deposits are drawn on outstation banks. Banks accept deposits in current account and allow unlimited withdrawals subject to a minimum balance. This minimum balance differs from Bank to Bank. Banks will not pay any interest on a current account. On the other hand, banks charge service charges, on such accounts. Opening of a current account is meant for a business enterprise or high worth individuals who deal with a lot of third party cheques, drafts etc. or who may at times need to borrow money from the Bank against some security.

Current accounts are mainly used by businessmen and are not generally used for the purpose of investment. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Most of the current account are firm / company accounts. Cheque book facility is provided in this type of accounts and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.

According to Reserve Bank, Current account is “a form of demand deposit wherefrom withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts that are neither savings deposit nor term deposit.”

See Also: What is Current Account?

Who can open a current account?

Current accounts are opened by those who have commercial interests and have the need to issue many cheques. These include:

  • Individuals
  • Sole Proprietorships
  • Hindu Undivided Families (HUF)
  • Partnerships
  • Trusts
  • Associations / Societies and Clubs
  • Limited Companies

Opening of a current account

The RBI has asked banks to incorporate a certificate in account opening forms confirming the identity, occupation and address of the prospective customer signed by the introducer.

Features of Current Bank Account

  • The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly.
  • There is no restriction on the number and amount of deposits. There is also no restriction on the withdrawals.
  • Generally bank does not pay any interest on current account. Nowadays, some banks do pay interest on current accounts.
  • Current account is of continuing nature and as such there is no fixed period.

Advantage of Current Bank Account

  • Current account enables businessmen to conduct his business transactions smoothly.
  • The businessmen can withdraw any amount at any time from their current accounts. There are also no restrictions on withdrawals.
  • The businessmen can make direct payment to their creditors with the help of cheques.
  • The bank collects money on behalf of its customers and credits the same to their accounts.
  • Current account enables the account holder to obtain overdraft facility.

Saving Bank Account

As the name denotes, this account is perfect for parking your temporary savings. These accounts are one of the most popular deposits for individual accounts. Savings accounts provide cheque facility and a lot of flexibility for deposits and withdrawal of funds from the account. Most of the banks have rules for the maximum number of withdrawals in a period and the maximum amount of withdrawal, but no bank enforces these. However, banks have every right to enforce such boundaries if it is felt that the account is being misused as a current account. At present the interest on these accounts is regulated by Reserve Bank of India. Presently Indian banks are offering 3.50% p.a. interest rate on such deposits

This account gives the customer a nominal rate of interest and he can withdraw money as and when the need arises. The position of account is depicted in a small book known as 'Pass Book'. Such accounts should be treated as a temporary parking area because the rate of interest is much less than Fixed Deposits. As soon as one’s savings accumulate to an amount which he can spare for a certain period of time, shift this money to Fixed Deposit. The returns on the money kept in Savings Bank account will be less but the freedom to withdraw is the highest.

Tips to remember while going for a Savings account

  • Choose a relatively smaller branch of a Bank for your savings account.
  • To open an account, you will require a photograph and an introduction from an account holder.
  • Select a Bank which asks for the least amount of minimum deposit.
  • Ask for a cheque book.
  • Most Banks have restrictions on deposits. Understand the restrictions well at the time of opening the account.
  • Select a Bank which has minimum restrictions
  • Some Banks impose service charges on activities like issue of cheque book. Try to get a bank that offers least charges

See Also: Functions Of Commercial Banks

Quick Review

Feature/Service Savings Account Current Account
Business Banking Not Applicable Yes
Minimum Balance Required Higher
ATM Cards Available Available
Interest Rate Applicable Mostly No
Bank Overdraft No Yes
International Transactions Depends Yes
Deposit Interval Not Applicable As per bank
Daily Withdrawal Limits Applicable Not Applicable, Mostly

Features of Saving Account

  • The main objective of saving account is to promote savings.
  • Withdrawals are allowed subject to certain restrictions.
  • The money can be withdrawn either by cheque or withdrawal slip.
  • No loan facility is provided against saving account.
  • Saving account is of continuing nature. There is no maximum period.
  • A minimum amount has to be kept on saving account.

Advantages of Saving Account

  • Saving account encourages savings habit among salary earners and others who have fixed income.
  • Saving account enables the depositor to earn income by way of interest.
  • Saving account helps the depositor to make payment by way of cheques / checks.
  • The bank offers number of services to the saving account holders.

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