Difference Between Current Account And Savings Account

Difference Between Current & Savings Account

Savings Account

If you are reading this article, you are probably looking to open a bank account and are unsure where to begin. Well, you have come to the right place. In this time and age, everyone needs a bank account to save and keep their money safe, among other things. But there are many types of bank accounts so choosing the right one can be tricky. This article aims to help you understand the difference between two major types of accounts, a current account and a savings account. Let's dive in!

As the name suggests, a savings account is an account that allows you to save your money in a bank account. It's a safe way to keep your money instead of keeping it at home with the risk of theft. A savings account is an interest-bearing account. That means your bank or financial institution pays you interest on the money you keep in the account. Usually, the interest rate is fixed and agreed upon the opening of your account.

Savings accounts usually have minimum balance requirements. That means that the account holder must maintain a certain amount of money in the account every month. The only exception here is a zero balance account with Digital Bank Savings Account, which is a type of savings account that does not require you to have a minimum balance. It is ideal for you if you do not have a regular income or cannot afford to maintain the required minimum amount.

Current Account

A current account is a type of bank account meant to facilitate frequent transactions by entrepreneurs, business people, and traders running their businesses. A current account is a non-interest-bearing account. That means that the bank does not pay any interest on the deposits. Also, the account has no limits on the number of transactions meaning account holders can deposit and withdraw from their account as many times as necessary. There is also no limit to the amount of money an account holder can deposit or withdraw from their account. But they must have sufficient funds in their account to complete the transactions.

Differences between Current and Savings Accounts

So if we try to understand what is the difference between saving account and current account, the following points can be helpful:

1. Interest: A savings account earns interest on savings, whereas a current account doesn't.

2. No. of Transactions: Savings account has a limited number of transactions, whereas, for a current account, the number of transactions is unlimited.

3. Purpose and Usage: A savings account is ideal for saving emergency funds and keeping money safe, whereas a current account is for business purposes.

4. Withdrawal and Deposits Restrictions: Withdrawals and deposits are limited for savings accounts and unlimited for current accounts,

5. Overdraft facility availability: Overdraft facility is unavailable with a savings account but available for current accounts.

6. Transaction limit and fees: Savings accounts allow limited transactions, therefore, attracting lesser fees than current accounts, which have unlimited transactions.

7. Required balance: Savings accounts have a minimum required balance. Current accounts don't have a minimum balance requirement.

8. Usage: Usually, savings accounts are for regular transactions or salary credit, whereas current accounts are for paying bills and performing business transactions.

9. Suitability: Savings accounts are ideal for individuals, whereas current accounts are ideal for businesses and business owners.

Importance Of Understanding The Differences

When opening a bank account, you have to compare different types of accounts to find the one that best suits your needs. In this case, you will need to compare current vs savings accounts. Understanding the difference between the two will ensure you make a well-informed decision.

For example, you are a small business owner, but instead of opening a current account, you open a savings account. As a result, you will experience limitations in your transaction, meaning the number of transactions will be pre-decided. It can reduce your business productivity and, ultimately, your revenue.

Features of Savings Account

The features of a savings account may vary from one bank to another. While this is true, some things remain the same across all banks. Below are some of the features of a savings account.

Definition and purposes: A savings account is a type of account meant to help individuals save money. Its main goal is to enable individuals to save for emergencies, receive their salary and keep their money safe.
Interest Rates: The interest rate on savings accounts may vary from bank to bank. But it mainly ranges between 2.5% and 4% interest annually.
Withdrawal and Deposit Limitations: Most banks allow a maximum of three to four withdrawals per month and do not limit the number of deposits.
Account Fees and Charges: Generally, savings accounts are low-cost accounts. But some banks may charge maintenance fees or penalties for non-maintenance of a minimum account balance.

Features of a Current Account

The features of a savings account may vary from one bank to another. While this is true, some things remain the same across all banks. Below are some of the features of a savings account.

1. Definition and purposes: a savings account is a type of account meant to help individuals save money. Its main goal is to enable individuals to save for emergencies, receive their salary and keep their money safe

2. Interest Rates: the interest rate on savings accounts may vary from bank to bank. But it mainly ranges between 2.5% and 4% interest annually.

3. Withdrawal and Deposit Limitations: most banks allow a maximum of three to four withdrawals per month and do not limit the number of deposits.

4. Account Fees and Charges: Generally, savings accounts are low-cost accounts. But some banks may charge maintenance fees or penalties for non-maintenance of a minimum account balance.