The two most common bank accounts are savings account and current account. These two are the most widely used accounts, and often banks offer variety of features in these accounts. But seldom do people know the difference between the two types of accounts and the basic operating features.
Here in this article we will discuss the major and minor differences of the two accounts.
Savings Account
Savings account as the name suggests is for personal savings. It allows the account holder to save and earn interest on the savings.
- Interest
Savings account is an interest bearing account encouraged for small savings. It offers a minimum saving rate of interest which is generally 4-6%. The interest is calculated on daily balance.
- Transaction limit
Usually savings account have a restriction on the number of withdrawals and on cheque issuance. A maximum of 30 cheques can be drawn per year, which may vary depending upon bank to bank.
- Minimum Balance
It also has a minimum account balance maintenance criteria wherein, the account holder needs to maintain a minimum balance in the bank account to prevent penalty charges. But some banks may waive it off to encourage savings.
- Additional Facilities
As Savings account is a type of personal account, it is opened on the name of the account holder. To facilitate withdrawal of cash, it offers net banking facility and a debit card. Generally, banks provide additional facilities with the savings account which may be chargeable at an extra cost and may vary from bank to bank.
Current Account
Current account is also popularly known as Business account. It is a business account as it represents a business organization instead of a person.
- Interest
It generally does not offer any interest and is used for easy facilitation of payments. It is mainly used by businesses to accept and send payments in the organisation’s name as current account cannot be opened under personal name.
- Transaction
Unlike savings account, current account does not limit the number of transactions. A business may need to make multiple transactions and the current account provides unrestricted facilitation of payments. Like savings account, current account also come with debit card, credit card, and internet banking facility.
- Minimum Balance
The minimum balance for a current account is usually higher than that of a savings account. It can vary from bank to bank. And when the amount goes below the minimum balance the account is liable for heavy penalty.
- Additional Facilities
As it is a business account, the banks also provide for an overdraft facility. It helps businesses make payments even when there are insufficient funds. The bank charges a nominal interest on the overdraft amount which is adjusted when the account holder deposits the money back into the account. There is also no limit on the number of cheques drawn and the transactions are quicker. Banks may offer various other additional facilities at an extra cost or for free, depending upon the bank policy.
