In this article, we are going to know about the basic difference between a saving account and a current account. Saving and current accounts are designed for different purposes and have different features.
A Saving account is basically for people who want to save whereas a current account is made for regular transactions, especially for companies or firms.
At banks, we are always faced with the option of choosing between a savings account or a current account. You must have seen this option while you transact or make a transaction through the ATM. You get the option of whether to choose a saving account or a current account.
Now, these are the two kinds of accounts that have been said to serve different purposes. So let us understand what are the two different purposes of a saving account and a current account and what is the basic difference between the two of them.
What is a Saving Account?
As the name suggests Saving account is for the purpose to help you save money. This type of account allows the account holder to deposit money as it is convenient on which the holder can earn interest.
For example every month you are saving an amount of 5,000 rupees so this 5000 is saved in your saving account and you get some interest on it which is between 4 to 6 percent.
So you are earning something, you are saving something. 5000 is the saving upon that you are also getting a rate of interest that is also saving. That is why this account is called the saving account.
A saving account may be open by an individual or can be operated jointly and requires the holder to usually have a minimum balance now. Maintenance of minimum balances only for saving accounts opened with private banks however if you’re opening a bank account with any nationalized bank you can get a zero balance saving account.
As well now interest rates on saving accounts range between 4 to 6 percent and they also carry the facility of issuing cheques. So I hope this point is clear the basic purpose of a saving account is to save money.
What is a Current Account?
Current accounts derive their name from the purpose they are suited for. Current means at present regular transactions. So if you are operating a business, if you are a company, if you are a firm, you need this account because there will be one hundred, two hundred maybe fifty transactions every day.
This account serves that purpose you can have any number of transactions through the current account. Now current accounts do not own interest due to the flexibility they offer.
Difference Between Saving Account and Current Account
So the basic and the most important difference between a saving account and a current account is saving account will give you an interest-earning on your balance and a current account will give you no interest.
The current accounts usually do not carry a limit on the number of transactions. So what is the other difference? A saving account has certain limitations for transactions and the current account does not have any limitations on making the number of transactions.
Savings Bank Accounts v/s Current Accounts
A saving bank account is a deposit account that allows limited transactions, while a current account is meant for daily transaction.
Essential Features of Saving Account & Current Account
Suitability: A saving account is most suitable for people who are salaried employees or who have a monthly income however a current account is best for traders, businessmen, and entrepreneurs who have to use their account very frequently.
Interest-earning: Saving account on interest rate up to around 4 to 6 % whereas current accounts do not earn any interest rate.
Overdrawing: When you withdraw more money from the account then your account is said to be overdrawn. In the case of a savings bank, there is no overdraft facility where is this facility provided for current accounts.
So if you are a businessman and if you have a current account you will get an overdraft limit up to which you can draw a certain amount of overdraft means extra money from your bank account for the meaning-making transactions. So that is the benefit of a current account but in saving accounts you will not get any overdrawing limit.
Minimum Balance: Minimum balance is required to be maintained in a savings bank account however in the current balanced account there is no such requirement. In current accounts, you do have the minimum balance requirement if it is a private bank however in public sector banks you won’t have that requirement.