When it comes to selecting a bank deposit facility with flexible usage, most individuals prefer opting for either a savings or a current account. These accounts are, however, assigned to meet different purposes and come equipped with a buffet of features.
To know the difference between a current account and savings account, look through the guide below.
Difference between Current Account and Savings Account
Savings and current accounts are two basic bank account types that individuals hold as per their specific requirements. While savings accounts are used primarily for individual purposes, current accounts are best fitted for those who conduct high-volume transactions on a regular basis.
A particular individual can also open both savings and current accounts with the same bank, thanks to their distinct operational characteristics.
Regardless, it is crucial to know the difference between a current account and savings account before opening one. Besides the usability, current and savings books have some fundamental differences such as minimum balance requirements, interest accrual, overdrawing and the likes.
To learn about such differences, initially, one needs to know what a savings account and current account is in detail.
It is one of the most common facilities that allow individuals to park their money safely with a bank. Account holders can also earn interest on the balance amount at a specific rate – quarterly/monthly/yearly or daily. The interest is compounded as per the bank regime, and it allows individuals to grow their corpus strategically in the long run. This is one of the primary differences between the current account and savings account.
Generally, individuals open a savings account primarily for limited transactions. Additionally, they can also withdraw and deposit money whenever they wish.
Depending on the type of savings book, an individual may also have to maintain a minimum balance which is usually lower than what is required for current ones. However, selected savings accounts are also available without minimum balance requirements.
One can open a savings account individually or jointly and enjoy ATM withdrawals, online transactions and similar facilities. Banks also issue passbooks and chequebooks against this fund. Since it is a liquid fund, account holders can withdraw money during any financial emergency.
However, unlike current ones, savings accounts accompany a limitation on the amount one withdraws or deposits and the number of transactions initiated.
To know more about the current account, refer to the next section.
Suitability is the primary difference between current and savings account. For instance, current account holders are primarily companies or businesspeople. As the name suggests, this profile is used for regular high-volume transactions. It also means there are no restrictions on the value and number of transactions initiated.
However, contrary to a savings account, banks do not pay interest on the available balance. Another current account and savings account difference is that the latter requires account holders to maintain a minimum account balance. The non-maintenance also attracts a penalty.
The primary aim of the current account is to ensure smooth business transactions on a daily basis. There is no way one can convert a savings account to a current account as these two represent entirely different functionality. Also, note that one cannot open multiple current or savings account with the same bank.
Therefore, it is necessary to conduct a current account vs savings account study to point out the major differences.
Savings Account v/s Current Account
The difference between current account and savings account is as follows:
|Savings Account||Current Account|
|Purpose||Promotes savings||Frequent transactions|
|Ideal for||Salaried individuals or anyone who wants to park funds and enjoy flexible transactions.||Businessperson, public or private firms, partnership firms and likes.|
|Interest accrued||Depending on the bank||No interest earning|
|Minimum balance||Requires minimum account balance, except for zero-balance account.||Higher minimum balance required.|
|Transaction limit||Applicable||Not applicable|
Remember that both savings and current accounts are zero-tax accounts. Additionally, KYC documentation is a crucial part of the process to open either of these accounts. The online account opening process is mentioned below:
- Visit the online portal of your preferred bank and navigate to account options.
- Select from current and savings account and choose a specific type like a zero-balance savings account, etc.
- Fill up the account opening form and submit it alongside the KYC form.
- After the submission is made, the bank representative will call you for verification.
- Once the verification is complete, your current/savings account will be activated.
Once you are aware of the difference between a current account and a savings account, it will be easier to choose the right one and leverage its unique characteristics.