A Deep Analysis: Difference Between Savings and Current Account

Difference between savings account and current account
Opening an account is no more a tedious and time-consuming exercise, and any person, young or old, may do so. The basic purpose of opening an account is to keep the money safe and sound, as well as to incorporate the habit of saving, thereby helping people make investments in future.
Money can be saved through banks in many ways, savings and current accounts, to name a few. Though current accounts are not very popular in the US, the savings account is very popular and found in most parts across the globe. Both, the savings and current account, have their own relevance.
Savings Bank Account
• Savings, as the word suggests, is to keep the money in hand, anticipating any uncertain future events. The holder of the account saves money, in order to make use of it in case of unforeseen contingencies.

• People whose usage of money on a per day basis is generally low, prefer this account. Thus, it is opened by people who need to use smaller sums of money on a daily basis in order to meet day-to-day expenses. Important aspects of savings bank account is the liquidity quotient and the credible rates of interest earned, as compared to the current account. Thus, it is a more preferred investment option. People who are less likely to spend, take the advantage of savings bank account, as it inculcates the habit of saving. Banks usually pay a small rate of interest, on the money deposited into such accounts, thereby promoting savings. The account may be owned by one or more persons.

• A person holding such an account receives a small-sized book known as passbook. The passbook gives details about the money deposited and withdrawn by the holder, and needs to be updated so as to know the amount, commonly known as balance, present in the account on particular dates.

• It is however, necessary to maintain a minimum balance in the account, so as to be free from any penalty charges levied by the bank. There exists certain confinements with respect to the number of withdrawals and also on the sum that can be withdrawn in a particular time span. Having ignored it, could result in the holder being penalized. The account holder may not necessarily receive a checkbook, and hence in such a case, withdrawals are to be done at the bank or through the ATM.

Regardless, it is considered a smart choice by people.
Current Bank Account
• A current bank account is patterned for the business society. It is also known as transactional account or checking account, which basically caters to the needs of the business communities, firms, and entities.

• Current accounts are designed, wherein heavy volume of transactions through checks exist.
Usually, banks do not pay any rate of interest to the holder. However, it must be noted that rarely, do some banks pay a very nominal rate. Hence, such an account holds good for those who neither have any intention of saving nor earning an additional sum in the form of interest. Banks do provide with a checkbook facility which enables the person to withdraw amounts as and when required. The person holding a current bank account can transact money very frequently in a day, and the bank does not impose any restrictions on the number of transactions undertaken in a given period of time. The account requires no minimum balance to be maintained. An overdraft facility against security can be availed, wherein the holder is allowed an extension of credit, that is, usage of more money than what is present in the account, for which an interest is charged on the principal amount, and both, the principal amount and interest needs to be repaid.

• However, an overdraft facility is solely dependent on the credit worthiness of the holder.
The account generates fast and quick money unlike the savings bank account. One simple motto of this account is that businesses should not fall short of funds.

The major difference in these bank accounts mainly lies in the balance to be maintained in the account, the rate of interest receivable, and the set of people opening such accounts. While the savings bank account administers to the needs of individuals, the current bank account is patterned for the business class.