By Niyati Mavinkurve
Banks play a very important role in society, in terms of mobilising savings from the people. They offer a safe and secure outlet to deposit extra funds, and by circulating those funds to businesses and people in the form of loans, banks facilitate enterprise and personal growth. Banks offer different solutions for savers to park their funds. Depending on the saver’s needs, they can invest in either a current account or a savings account.
Understanding the essentials of each of these accounts can help in choosing the right account for the saver’s needs. A current account is the best option for a business, which needs to have higher liquidity and greater facilities to manage their day to day expenses. A savings account is preferred by individuals, who find it a secure avenue to park their surplus funds, or to collect their monthly incomes.
What is a current account?
A current account is a customized solution a bank offers for a business. A business has certain special requirements, such as extra liquidity, higher number of cheques, no withdrawal or deposit limits, among others. To provide a seamless way for a business to manage their money, banks offer current accounts.
These accounts are completely flexible and have no restrictions. These no restriction accounts help businesses manage their cash flow to meet their requirements. To compensate the bank for the services that they provide, a current account does not bear any interest. This means that the account won’t earn any interest on the balance maintained in the account. Current accounts also have a higher minimum balance to be maintained. This does not mean that the business has to maintain the same balance every day. The minimum balance here is calculated for a fixed period of time, such as a month or a quarter. The average minimum balance in the account should meet the guidelines fixed by the bank.
Current accounts also provide their account holders some other benefits:
a. No restriction on cash withdrawals
b. A higher limit for cash deposits in a particular month
c. Higher number of free cheques or no restrictions on free cheques available every month
d. No restrictions or few restrictions on cheque deposits in a day or a month
e. Personal Relationship Manager for current accounts
Apart from these, banks customize the features of the current account depending on the needs of the business. They provide a large number of features as a part of internet banking which makes transacting seamless. Banks have different tiers with each tier providing different facilities. Some banks auto upgrade the customers to different tiers when the account becomes eligible.
What is a savings account?
A savings account is the bank’s customized solution for individuals. Most individuals withdraw cash infrequently and need a secure institution to park their funds in. A savings account provides convenience and safety to an individual saver. Depending on the person, a savings bank account is personalized.
A salaried savings bank account provides the convenience of a regular savings bank account without the restriction of maintaining a minimum balance. Banks also provide savings accounts with special features for senior citizens. These accounts usually have a higher rate of interest as compared to other savings accounts. Recently, banks have come up with savings accounts for children to promote financial literacy earlier in life.
A savings bank account has the following features:
a. Interest bearing account, with interest rate of around 3-4%. Some banks offer higher rates of interest for higher balances
b. Limited number of cheques issued for a year
c. Access to internet banking
d. Restriction on cash deposits in a particular month, and also the branch where cash is deposited i.e. a higher cash deposit limit at the branch where the savings account is opened and a lower cash deposit limit in other bank branches
e. Limits on withdrawals in a particular month
f. Preferred savings accounts have a relationship manager
Banks are an essential link between people who require funds and people who have funds lying with them. By providing a host of different accounts for different categories of savers, banks promote a spurt of savings and investment at the same time.
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