Before going to open an account in a bank, one should be clear in mind, as to which type of account is best suits their requirement. If a person wants to open an account to keep his/her savings to fulfill their future needs and desires to earn income from such savings then nothing is better than a saving bank account. However, if an individual or entity, wishes to open an account that can be operated end number of times, during a working day, then current account or checking account is best.
While savings account is mainly preferred by the clubs, associations, individuals, trusts etc. current account is meant for individuals, business entities, government bodies, societies, trusts, institutions, etc.
To further comprehend this, read out the article to get full fledged knowledge on the difference between savings account and current account.
|BASIS FOR DIFFERENCE||SAVING ACCOUNT||CURRENT ACCOUNT|
|Meaning||Saving bank account is an account meant for individuals who like to save for meeting their future financial requirements.||Current account refers to a running account, in which there is no limit on the operation, during a working day.|
|Objective||To encourage savings of a person.||To support frequent and regular transactions.|
|Suitable for||Individual||Businessman or company|
|Passbook||Provided by banks||Not issued by banks.|
|Opening balance||Less amount is required to open a savings bank account.||High amount is required for opening a current account.|
Definition of Saving Account
Savings Account is the most common type of deposit account. An account held with a commercial bank, for encouraging savings and investments is known as a Saving Bank Account. A savings account provides an array of facilities like ATM cum Debit Card facility with different variants, calculation of interest on a daily basis, internet banking, mobile banking, online money transfer, etc.
The account can be opened by any Individual, Agencies or institutions (if they are registered under the Societies Registration Act, 1860). A Pvt. Ltd and a Ltd. company are not allowed to open a savings account.
Definition of Current Account
A deposit account maintained with any commercial bank, for supporting frequent money transactions is known as Current Account. A plethora of facilities is provided to you, when you opt for a current account like payment on standing instructions, transfers, overdraft facility, direct debits, no limit on the number of withdrawals/deposits, Internet Banking, etc.
This type of account fulfils the very need of an organisation that requires frequent money transfers in its day-to-day activity.
An Individual could open this type of account, Hindu Undivided Family (HUF), Firm, Company, etc. Account maintenance charges are applicable as per the bank rules. The current account is also known as checking account or a transactional account.
Key Differences Between Savings Account and Current (Checking) Account
The difference between savings account and current (checking) account can be drawn clearly on the following grounds:
- Savings account refers to an account that is meant for people who keep their saving to fulfil their financial requirements in future. Current (Checking) account is an active account which is meant for day to day monetary transactions.
- Savings account aims at encouraging savings of the general public whereas current account supports frequent and regular transactions of the account holder.
- Saving Account is appropriate for salaried people and the group of people like the club, trust, an association of persons, etc. for regular savings. Conversely, Current Account is perfect for business entities, government departments, societies, institutions, etc. because they have to deal with daily money transactions
- There is a restriction on the number of daily and monthly transactions, in the case of a savings account, i.e. if the transaction limit exceeds the specified limit charges may apply. There is no such cap for a Current Account, in essence, there is no restriction on the number and amount of transaction.
- The current account is non-interest bearing, but a saving bank account earns interest, which is normally 4-8%.
- Passbook is provided by banks on the savings bank account which lists the number of debits and credits to.from the account datewise. On the account, no passbook is issued by the bank to the current account holders.
- Bank overdraft facility is provided to the current account only and not n the savings account.
- The opening balance required to start a savings account is very less. In contrast, current account requires high amount as the opening balance, to start the account.
- Type of Demand Deposit
- Internet Banking Facility
- Multicity Cheque Facility
- Nomination facility
We have discussed in detail about both the entities, and it is quite clear that the two are important in place. If we talk about the major difference between them, it is the number of transactions – withdrawal or deposit.