What is the significance of a savings bank account and a current account? What is the difference between the two? These are some of the questions that may come to your mind when you are in the process of deciding the best place to store your funds.
A savings account and a current account are two distinct kinds of deposit accounts offered by financial institutions. They serve different needs and are designed for different purposes. Understanding the distinctions between current accounts and savings accounts can help you make well-informed decisions.
Current account vs savings account
Purpose
A savings account is essentially for individuals who wish to save their funds and earn interest on it.
It encourages the habit of saving for future requirements.
For example, the Indus Delite Savings Account from IndusInd Bank offers attractive features such as cashback on entertainment, fuel, OTT spending, and dining, and has a zero balance requirement, making it the best choice for individual savers.
In contrast, a current account is best suited for merchants and businesses with numerous daily transactions.
The IndusInd Bank Indus Tarakki Account, with features such as no monthly balance requirement and free cash deposit of up to ₹5000 per month, is a perfect example of a current bank account.
Interest earnings
One of the basic distinctions between a current account and a savings account is the opportunity to earn interest.
A savings account is a kind of deposit account that pays an interest constituent on the balance maintained. The interest rate differs from one financial institution to another, and it is an excellent way to grow your savings over the long term.
In contrast, a current bank account does not offer any interested constituent as it is primarily used for performing business transactions. The focus is more on the ease of transaction than earning interest.
Hence, when comparing current accounts vs savings accounts, this difference is essential to note.
Minimum balance
The next factor to consider when selecting between a current and savings account is the minimum balance requirement. Most savings accounts require you to maintain a specific minimum balance. If the balance falls below this limit, a penalty is charged.
However, some accounts like the IndusInd Bank Indus Delite Savings Account are zero-balance accounts, which can simplify the process of opening and maintaining your account.
In contrast, the minimum balance requirement for a current account differs widely based on the business type. Some accounts, like the IndusInd Bank Indus Tarakki Account, may waive this requirement while premium current accounts might necessitate maintaining a minimum balance.
Overdraft option
An overdraft option is a credit agreement with a financial institution that permits you to use funds surpassing your account balance. While this feature is commonly found in current bank accounts, it is not usually available in savings bank accounts.
This facility tends to serve as a financial lifeline for businesses that need to manage their cash flow efficiently.
Transaction limit
Savings accounts come with a limit on the number of transactions allowed in a given month. This limit involves both debit and credit transactions. If you exceed this limit, a fee may be charged. In contrast, current accounts are tailored for businesses that have high transaction volumes daily.
Thus, they offer unlimited transactions, making business activities uncomplicated and smooth.
Who can operate
Savings bank accounts are usually opened by individuals for personal use.
However, current accounts can be opened and operated by individuals as well as distinct entities like companies, partnerships, associations, trusts, etc. This flexibility makes current bank accounts more suitable for business purposes.
Ending note
The choice between a current account and a savings account depends on your financial goals and needs. If you are an individual looking to save and earn interest on your funds, a savings bank account would be the perfect choice.
However, if you operate a business with multiple transactions daily, a current bank account would be suitable.