If you have ever visited a bank to withdraw cash, you must have come across the option of selecting between 2 account types; the savings account and the current account. Both these accounts are set up to serve different purposes. While the savings account are for those who wish to save the current accounts are meant for those who have to deal with a lot of transactions. Let’s check out the major difference between the current account and the savings account.
What is a Savings Account?
The primary purpose of savings account is to allow you to save. The account holder earns interest on the balance in the account. Savings account can be opened both individually and jointly and the account holder requires to maintain the pre-specified minimum balance. The rates on savings account are around 4%-6%.
What is a Current Account?
This account is more used by firms, businessmen, companies for regular transactions. These accounts do not carry limit for the number of transactions and volume of transactions. And because of this fluid nature of the current account it does not have any interest.
Now let’s look through the difference between the current account and the Savings Account
Both these accounts accrue to different needs of the user, and helps in the money management process. So the significant points basis which we can differentiate are:
Savings account helps to save while a current account helps in dealing with large volume of transactions.
Whom is it for:
Savings account is ideal for those individuals who are salaried – have a steady income or retired who wish to save for their retirement expenses. This account is also useful for short-term goals like vacations, buying an expensive phone, or gathering downpayment for a car.
Current account is for those who need to carry out regular transactions like money transfers, or making payment. These individuals are businessmen or a firm owner, or corporates.
Monthly transactions limit:
Savings Account: The banks have an upper limit on the number of transactions that is allowed from the account. Most banks allow 3-5 transactions per month which are free. Beyond this if the account holder wishes to do any transaction, he/ she will have to pay a nominal fee.
Current Account: There are no maximum limit to the number of transactions carried out from the current account as the account is primarily meant to have unlimited transactions. Also if a few accounts have a cap then it would too high.
Savings Account: These accounts do not have unlimited transactions hence it is easier to maintain a significant sum in the account. So savings account earn interest on the funds over a period of time. The interest rates are around 4-6% depending upon the bank in which you have a savings account.
Current Account: Due to the fluid nature of the current account, these accounts do not earn any interest. Also as there are frequent transactions, the funds in the account is always variable which is why there are no interests on this account.
Also, along with these differences, a minimum balance needs to be maintained, which is different in both the accounts. The savings account requires to maintain low balance while in case of current account the minimum balance may be quite high.