Opening a bank account is an important foundation of your financial journey. While you will find several types of bank accounts in the market, savings accounts and current accounts are the most popular. If you are a salaried individual, a savings account will offer the right avenue for you to manage your finances. On the other hand, if you are a business owner, a current account is ideal for making frequent transactions and withdrawals.
In this article, we will explore some key differences between these two types of bank accounts.
What is a savings account?
This is a basic bank account owned by most individuals in the world. A savings account gives you a safe avenue to deposit your money and withdraw it with ease. Your funds also earn a modest interest while they lie with the bank. On an average, a savings account offers an interest rate between 4-6% on your deposits. You can open this account either as an individual or jointly with a family member.
What is a current account?
This account is meant for businesses, whose financial needs are starkly different from those of individuals. Such accounts have less restrictions on deposits and withdrawals, compared to savings accounts. If you run a partnership, sole proprietorship, or a private limited company, you can open a current account with any bank in India.
How do the two differ?
Savings and current accounts are designed to meet different needs. While savings accounts cater to individuals, current accounts are meant for companies. Let’s understand the differences between the two in detail.
The primary purpose of a savings account is to encourage savings amongst individuals. If you are a salaried individual or have an otherwise steady income, open a savings account for your monthly transactions. On the other hand, current accounts are meant for businesses that transact more frequently than individuals.
Savings accounts are meant for individuals with steady income who are looking to deposit and withdraw money in a limited manner. Current accounts are meant for business persons who are involved in frequent transactions.
Transactions and withdrawals
In a savings account, you can only make a limited number of free transactions in a month. Current accounts, on the other hand, are built for the express purpose of frequent withdrawals and transactions.
What’s more, current accounts also offer customers an overdraft facility, using which they can withdraw more money than they hold in the account. This facility is not available to savings account holders.
In a savings account, you earn a modest interest on your deposits. This is paid to you every quarter or semi-annually. On the other hand, you don’t earn any interest on your deposits in a current account.
Most banks will ask you to maintain an average minimum balance in your savings account. Failing to do so could invite a penalty. However, this balance is lower than the requirement for current accounts. What’s more, many banks also offer a zero-balance savings account, which does not require you to maintain a minimum balance.
When to choose a savings account?
Be it an emergency transaction or your monthly expense, a savings account offers a convenient way for you to bank. You have 24*7 access to your account through net banking and mobile banking services. To withdraw money, you can visit the nearest ATM and do so with ease.
Opening a savings account is easy. You either have to maintain a nominal balance or none at all. Many banks also offer attractive cashbacks, rewards, and other privileges to savings account holders.
Thus, if you are a salaried person looking to put your savings away safely, open a savings account today.