Bank accounts are essential for individuals to manage their finances in India. They not only provide a secure place to store your money but also offer various facilities such as ATM withdrawals, online transactions, and loans. The two most popular types of bank accounts in India are savings and current accounts. While both accounts serve the same purpose, their features and usage differ. First, let’s understand and compare current account with savings account.

What is a savings accounts?

A savings account is a bank account primarily used to deposit and withdraw money and earn interest on the remaining balance maintained in the account. It is an essential financial tool for individuals to save money and manage their day-to-day expenses. Various public and private banks offer savings accounts and typically require a minimum balance to be maintained.

Additionally, savings accounts offer interest on the balance maintained, which varies from bank to bank and is subject to change from time to time. However, the interest earned on savings accounts is generally lower than that earned on other investment instruments.

What is a current account?

A current account is a type of bank account used by entrepreneurs, businesses, and organisations for frequent transactions. Unlike savings accounts, current accounts generally do not earn interest on the fund maintained in the account. Instead, they are designed to facilitate regular business transactions, such as making and receiving payments, issuing cheques, and conducting online transactions.

Commercial banks typically offer current accounts with higher minimum balance requirements than savings accounts. They also offer features such as overdraft facilities, online banking, and mobile banking, which make it easy for businesses to manage their finances.

Differences between savings and current account

• Purpose

A savings account is designed to encourage individuals to save money and manage their day-to-day expenses. It is typically used for personal transactions and saving for future goals. On the other hand, a current account is designed to facilitate business transactions, such as making and receiving payments, issuing cheques, and conducting online transactions on a daily basis without restrictions.

• Minimum balance

Both savings and current accounts require a minimum balance to be maintained. However, the minimum balance for a savings account is typically lower than that of a current account. This is because savings accounts are designed for personal use, while current accounts are used for purely business transactions.

• Interest rate

Savings accounts generally offer high interest rates than current accounts. The interest rates vary from bank to bank and may change from time to time. In contrast, current accounts do not earn any interest on the remaining account funds.

• Fees and charges

Savings accounts typically have lower fees and charges than current accounts. Current accounts have higher fees and charges due to the additional services provided to businesses, such as transaction fees, cash handling fees, and account maintenance fees.

• Suitability

Savings accounts are best suited for individuals who require basic banking services and want to save money. On the other hand, current accounts are best suited for businesses requiring frequent transactions and advanced banking services.

• Transaction limitation

Savings accounts have a limited number of transactions per month. This is because they are primarily used for personal transactions and saving money. Current accounts, however, do not have any restrictions on the number of transactions, as they are designed to facilitate frequent business transactions.

• Overdraft facility

An overdraft facility is a feature offered by banks to allow customers to withdraw more money than they have in their account up to a pre-approved limit. Overdraft facilities are typically not available with savings accounts but are available for current accounts to help businesses manage their cash flow.

Conclusion

By understanding the differences between the two, individuals can make an informed decision on which account is best for their needs. It is essential to choose the right type of account that meets your specific financial needs and goals.