You must be aware of the types of bank accounts when you are going to open a bank account. It is important to analyze your needs before you choose an account. Like if an individual wants a bank account to keep his savings to fulfill his future needs and wishes to earn revenue from such savings, then a savings account is the right choice.
However, if a person or firm desires to open a bank account that can be accessed countless times during the working day, then chequing or the current account is the best option.
A savings account is mostly preferred by associations, individuals, clubs, and trusts. While a current account is more suitable for, government bodies, institutions, societies, and business entities. Continue reading this article to further figure out the difference between savings and current account.
Meaning of Savings and Current Account
Here in this section, we will discuss two definitions i.e. what is a savings account and what is a current account.
A savings account is a commonly used deposit account that is opened in a commercial bank for promoting savings and investments.
This type of account provides facilities such as ATM-cum-Debit card facility with various variants, internet banking, calculation of interest each day, online money transfer, mobile banking, etc.
A savings account is opened by individuals, institutions or agencies if registered under Societies Registration Act. A private limited company cannot open this account.
A current account is also operated by a commercial bank for promoting everyday money transactions. This type of account provides several facilities like instant withdrawals, transfers, direct debits, internet banking, no limit on the number of deposits/withdrawals, overdraft facility, mobile banking, etc. A current account is suitable for entrepreneurs and traders who need money transfers every day.
Key Differences between Savings and Current Account
Now, that you have a basic understanding of what each of these accounts are, you can move to the next step. Here, you can analyse the key differences in chequing vs. savings account so that you can determine which one is more suitable for your needs. In turn, you will be able to make a more informed decision.
A savings account is suitable for individuals who want to use their savings for future financial requirements. Whereas, a current account is suitable for day-to-day monetary transactions.
Savings account encourages savings of individuals while a current account facilitates regular and frequent monetary transactions by account holders.
A savings account is best suited for salaried persons and a group of individuals like trust, association, and club for regular savings.
On the other hand, a current account is ideal for government departments, business entities, institutions, and societies as they have to cope with day-to-day money transactions.
There is no earning from a current account, whereas a savings account provides 4-8% earning as interest.
A savings account has a limit on the number of monthly and daily transactions, and if that limit surpasses, charges will apply.
Conversely, there is no limit on the number of transactions for a current account.
Only a current account provides a bank overdraft facility. It means current account holders can withdraw more cash from their accounts than the actual balance.
The required minimum balance to maintain a current account is much high as compared to a savings account. A passbook is provided with a savings account that records the number of credits and debits from/to the account. Conversely, a passbook is not issued in case of a current account.