What is the difference between a current and savings bank account? |
Posted: October 4, 2017 |
Savings account and the current account are two popular account types provided by all the banks in India. A savings account, as the name depicts, encourage savings. It allows customers to save and deposit the money according to their convenience, on which they can earn an interest. A current account, on the other hand, is opened in the name of businesses and firms typically owned by the customer. The amount deposited in the current account does not earn any interest due to the flexibility it offers. Below is the list of other factors that differentiate between a current and savings bank account:- 1. Purpose: A savings account promotes savings of funds whereas a current account is designed to make regular transactions. One thing that both these accounts have in common is that these do not have a maturity date unless the customer himself does not want to close these accounts. 2. Interest rate: Savings account help customers earn interest on the basis of money deposited in it. The interest rates applicable to these account types however vary from one bank to the other. The current bank accounts, on the contrary, do not earn interest. However, banks like SBI do offer interest on current account to keep hold of huge transactions that are being made through current accounts. 3. Transactions: In savings accounts, banks have set the limit on the number of free transactions that a customer can make in a month. The permitted limit without attracting any charge is somewhere between 3 to 5 financial and non-financial transactions per month. In current account, you can make as many transactions as you want as there is no limit on the number of transactions you make from these accounts. This is because current accounts are meant to perform frequent transactions. Also, banks provide cheque book facility to both savings and current account holders to help them deposit and withdraw money expediently. 4. Minimum balance: Customers with savings account are ought to maintain a minimum balance in the account. And if the minimum balance is not maintained, there is a penalty levied by the bank. The minimum balance criteria and penalty differ widely across banks in India. In some cases, this condition is waived off to compensate for a lesser number of free services provided by the bank (like no cheque books, a lesser number of free transactions, etc.). Similar to savings accounts, current accounts also follow the minimum balance criteria. However, the minimum balance that customers should maintain in the current account is much higher than the savings account. Generally, it starts from Rs. 10,000/- for public sector banks, while in private banks, customers need to maintain a minimum balance of Rs.20,000 to Rs.70,000 monthly and this varies across banks. 5. Other factors: Apart from these factors, the other most important thing that differentiates current account from a savings account is the overdraft facility that allows customers to withdraw more than what is deposited in the account to sustain the cash flow in business. This amount is then adjusted later when the money is deposited in the account. One thing to note is that the banks charge additional interest on the exceeded amount that you withdraw considering it as a short term loan. These are quite a few significant factors that differentiate between a savings bank account and a current bank account. If you are planning to open a bank account, you must have a clear knowledge of these factors to make your decision wisely. Almost every private and public sector banks offer these account type. However, it’s your responsibility to choose the right account as per your needs and requirements.
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