You are bound to get confused with so many types of accounts available! When it comes to your hard-earned money, it is crucial to think twice about where to keep it, depending on the benefits you get.
Today, we will discuss the difference between current account and savings account, two of the most popular account choices.
What is a Current Account?
Business people who have to do a huge number of transactions daily open a current account for hassle-free and uninterrupted financial activities. You can do regular bulk transactions daily, including deposits, contra transactions, and withdrawals.
What is a Savings Account?
A savings account is an interest-producing account meant to save funds to achieve a short-term goal. Depending on the bank, these accounts typically pay a decent amount of interest rate on your investments.
Current Account vs Savings Account
Before delving into the details, let's first take an overview of the points of difference between a current and a savings account:
|
Savings Account |
Current Account |
|
|---|---|---|
|
Purpose |
A savings account's main aim is to collect future wealth. |
A current account is opened to carry out frequent business transactions. |
|
Minimum Balance |
Some banks hold a minimum balance requirement, while some are zero-balance. |
You have to maintain a high minimum balance when compared to a savings account. |
|
Interest Rate |
You get a set interest rate on your savings. |
Mostly, these are not interest-bearing accounts. |
|
Monthly Transactions |
Limited transactions are allowed monthly. |
There's no monthly transaction limit. |
|
Borrowing Limit |
There is no overdraft facility allowed. |
Account holders can make overdrafts for the short term. |
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Purpose of Account Opening
A savings account is opened for different purposes. One might want to save their earnings for completing a short-term goal or build an emergency net. Since savings accounts provide interest rates, some people open them to earn interest on what they save. These interest rates depend on banks. Some provide a low-interest rate, while some have high rates.
On the other hand, a current account has a clear aim. People open it to carry out business or trade transactions. They open them to carry out hassle-free big transactions daily.
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Minimum Balance Requirement
Earlier, your savings account needed to hold a certain amount to escape maintenance fees. However, as times change, and with several different digital savings accounts introduced, there are zero balance savings accounts today.
Digital savings accounts offer a zero-balance savings account. It means you can spend the last penny in your account without worrying about paying the maintenance fees!
However, with a current account, you have to maintain a minimum balance which is usually higher when compared to savings accounts.
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Interest Rate on the Account
Usually, current accounts do not provide any interest rate. However, some banks have started providing account holders with a nominal rate. With savings accounts, you are sure shot going to receive an interest rate. But the interest rates will defer based on your bank's standard rate.
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Monthly Transactions Allowance
Current account holders can make transactions with no restrictions. You can make several deposits hassle-free without worrying about the transaction limit.
With a savings account, you usually get a transaction limit. You can only make a certain number of transactions in a month. Generally, this limit is anywhere between three to five financial and non-financial transactions without any charges.
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Borrowing Limit
Current account holders have the ability to overdraft for a short term. Overdraft is a financial facility that allows account holders to withdraw more than what's available in their accounts. While this facility is available in current accounts, there's no overdraft allowed in a savings account.
