When I was a child, I used to save my pocket money in a piggy bank. Whenever I needed some money I used to jerk my piggy bank and a few coins used to come out of it. The concept of piggy bank seems fascinating as a kid, but in reality, depositing our savings is a different ball game altogether.
During the ancient civilizations in India, people used to store their grains, weapons and precious metals in temples and palaces. These used to act as their Bankers. Nowadays, Banks are the business entities where the people deposit their savings.
Everyone is required to have an Account with a Banker for some reason or the other. If you are a salaried person who wants to store his/her savings safely with a Banker, you need to open a Savings Account with them.
On the other side, if you are a businessman you need to make a plethora of payments every day. Furthermore, you are also required to deposit your cash receipts and bank cheques off and on in your Bank Account. Here, your Savings Account will not come into any use in this matter. It is your Current Account which will serve the intended purpose.
What is a Savings Account and Current Account?
A savings account is primarily designed for helping you in depositing your savings in a safe place.
A Savings Bank Account holder earns interest on his/her deposit which ranges from 4 to 6%. You can open a Savings Account with a Banker individually or jointly. Most banks mandatorily require the holders to keep a minimum specified amount in his/her Account to keep it operational.
Savings Bank Accounts are of various types. They include salary savings accounts, regular savings accounts, and zero balance savings accounts. Moreover, there are specific savings accounts for minors, senior citizens and women.
Current Accounts are suited for regular transactions. These are exclusively meant for those who conduct businesses and involved in the day to day transactions. They are mainly opened by business organizations like firms, LLPs, companies, sole proprietorship concerns, etc.
There is no restriction with regard to the number of deposits and withdrawals from a Current Account. As Current Accounts offer immense liquidity to their users, they don’t offer any interests on the deposits made.
Savings Account vs Current Account
Now that you have understood the basics, let us have a quick look at some of the major points of differences between savings account vs current account.
Savings Accounts encourage and promote savings among individuals. On the other hand, Current Accounts allow seamless transactions for a business.
Savings Accounts are suitable for regular income earners like salaried individuals in meeting their short term financial goals. Current Accounts are designed to meet the financial transactions of business entities.
If you open a Savings Account, your Banker might put a restriction in the number of transactions you can carry out in a month. Current Accounts help the holders to carry out frequent transactions. There is no limit in the number of transactions a Current Account holder can carry out.
You can generally earn 4 to 6% interest on your deposits in Savings Account. On the other side, Current Account holders don’t earn any interest on their deposits.
The Savings Account of an individual can attract a penalty if he/she fails to maintain a prescribed minimum balance in his/her Account. The concept of minimum balance is applicable in Current Account as well. The minimum balance requirement for Savings Accounts is generally on a lower side while that of the Current Accounts is relatively higher.
As a Savings Account holder, you cannot withdraw more money from your Account than the balance available. The Current Account extends overdrawing facility to its holder. When the holder deposits back the money which was withdrawn earlier, such deposit is adjusted with interest. This feature of the Current Account helps its holders in managing their fund deficits.
Everyone who uses a Bank Savings Account knows that his/her savings are safe with the Banker. Moreover, Bank provides you liquidity all the time as you can withdraw your money at any ATM via your Debit Card anytime.
Benefits of Savings Account
Let us discuss some key benefits of Savings Account which you may not be aware of.
For most banks, you get a discount of 15 to 30% on your locker fee if you are consistent in maintaining a minimum balance in your account every quarter.
There are many Banks which offer life insurance and medical insurance if you open your Savings Bank Accounts with them. What you need to do is to maintain a prescribed minimum account balance in your Account and keep paying regular premiums.
Generally, Banks offer 3.5 to 4% on your deposits. But, there are some Banks which offer 6 to 7% interest if you keep a balance over and above a certain limit.
For a savings account, you might possess a Debit Card. But you may not be aware of the fact that you can convert it into an international Debit Card if you have to carry out transactions overseas.
You may know that gold is one of the most favorite physical assets for the Indians. Furthermore, the price of gold is mostly on a higher side. If you are a Bank Savings Account holder with a large balance, a discount of 2 to 5% will be available to you in case of you purchase gold.
You can utilize the balance in your Savings Account in paying your credit card bills and other utility bills like water, gas, and electricity. Moreover, you can carry out online purchases via Debit Card and Internet Banking facility.
Having a Savings Bank Account is a must if you want to trade or invest in the Financial Market. Your Bank Account is required to be linked to your Broker’s Trading Account and Demat Account by your Securities Broker. After such formality is done, you can carry out any transaction in the Securities Market.
Also read: How Much Should You Save - 50/20/30 Rule!
Benefits of Current Account
We have discussed earlier that if you have a Current Account with any Bank, you can carry out any number of transactions in a month. Moreover, you will also enjoy overdrawing facilities in your Current Account.
Here, let us have a look at the other major benefits of using a Current Account:
Depositing money in your Bank Account and paying your creditors gets simpler with cheque and demand draft facility. In addition to that, you can also send instructions to your Banker to carry out recurring tasks on your behalf. Moreover, Banks provide online banking, doorstep banking, and telephonic banking to Current Account holders.
If you are a Current Account holder, it will not only provide you with a clear picture of your business but also help you in raising a loan from your Banker or any other financial institution.
All Banks provide online Banking services. Therefore, you can operate your Current Account from multiple cities and towns. Nowadays Banks operate on Core Banking Solutions (CBS). This helps you to consolidate your current account transactions with ease. Therefore, wherever you go for your business tours in India, your Banking services with your Banker will never stop. You can visit the branch of your Bank in any place you go and carry out your transactions.
If you maintain your Current Account with a good track record, your Banker can extend bank guarantee services to you. Many vendors demand bank guarantees. So, this facility is extremely useful if you are considering entering into any foreign trade.
Both Current Accounts and Savings Accounts are different with regard to their features. They both have their own merits and limitations. This article aims at providing you with an overall understanding of both types of Bank Accounts.
It is completely up to you to decide which one you would go for. When you know the differences between them, you can open the account which aligns with both your purpose and convenience.