Current Account vs Savings Account

Stepping into the financial space can be a bit confusing sometimes. The initial days sometimes confuse you as you have to witness a few new and unknown terms. Although learning about them is not as hard as it seems, we make it so. The Current and savings account is one among these undiscovered words. 

However, the difference between the current and savings accounts is easily visible. You can find it through their names within seconds. The current account helps you make current transactions like import and export of goods, payment of salary and other business expenses. It is a transactional account that provides you with an overdraft facility while the savings account helps you save your money. It also allows you to earn interest in your savings.

Let us have a quick sneak peek into the current account vs savings account.

What are Current Account and Savings Account?

Current Account

As per Oxford Dictionary, “Current Account is a type of bank account that you can take money out of at any time, and that provides you with a debit card and (sometimes) a chequebook”. The current account facilitates all day-to-day transactions for businesses and organizations. It is also known as the Checking Account due to the initial use of cheques for making payments. The account does not impose any limits on the number of withdrawals. You can even make a withdrawal of more than your holdings in the current account. However, you must maintain a high account balance to avail the premium benefits.

Unlike the savings account, the current account does not have a provision for interest earnings. Also, the account is made available on a special request by the applicant. It is mainly available only for immediate and frequent access.

Savings Account

A savings account facilitates savings and earning together. It helps you to make more money through interest on all your deposits. It is safe and reliable and enables you to fulfill your short-term and long-term needs. However, it induces you to maintain a minimum balance and prepares you for your financial needs. It has certain limitations on the number of withdrawals. Yet, it’s an add-on to your funds and acts as a pillar in case of any future emergency.

Difference Between Current and Savings Account

The current account and savings account differences are based on the following parameters. More factors in the tables given below.

 

Purpose and Suitability

The Current and savings accounts serve different purposes. The former is for firms, business people, and those performing regular transactions. On the other hand, the savings account mainly caters for the salaried class. It serves people who tend to save and offers them an interest in it. The savings account serves long-term purposes, whereas the current account operates for immediate transactions. However, a current account is suitable for people with high-income or business families. It deals with business people and firms engaged in frequent transactions.

Usage

What are savings accounts and current accounts based on usage?

Both accounts fulfill the different needs of different groups.

We know the savings account serves the salaried class as it helps them save and earn simultaneously. They know that their funds are secure and growing regularly. They use this mainly for trips, vacations, or other financial emergencies. In simple words, it is used for and by individuals. In contrast, the current account is used for firms.. Its usage is not concise to personal needs but to the growth of a business. 

Minimum balance

Current accounts and savings accounts are also differentiated based on minimum balance. The minimum balance is the required limit to be maintained in the bank account. The minimum required balance is usually low for the savings account. However, the limit is typically high in the case of the current account. It may be because of its extraordinary services and offers.

Interest

Interest is also one of the reasons for savings and current account differences. It is the rate at which you are paid for your deposits. The savings account helps you earn 2.5 to 4% interest on your deposits. However, it limits the number of withdrawals, which means you can raise more funds over time. In comparison, banks do not provide any interest in the case of a current account as it is mainly for current and frequent transactions.

Monthly Transaction

There is a specific limit on the current and savings account transactions. The savings account restricts the number of transactions per month to 3-5. It has some extra charges if the limit exceeds. In comparison, the current account does not limit its users. It adds flexibility to the number of transactions. You are free to make any number of transactions per day.

Difference Between Current Account And Savings Account (based on features)

Benefits of Savings Account over Current Account

When it comes to the benefits of a savings account and current account, it really depends on what your needs are. Both accounts provide different benefits to different groups of people. If the savings account is beneficial to the monthly income group, the current account provides the best services to mainly businessmen. 

For those looking to save money, a savings account may be the better option as it typically has a lower interest rate than a current account. This means that you can earn interest on your deposits without having to worry about paying taxes on the earnings. It makes us future-ready and is mainly for the middle-income group that comprises a significant share of the population.

Final Say

The current account and savings account differences are based on many points. All these points highlight the primary purpose for which they have been designed. However, the savings account is now a word of many. Its interesting facility makes it a perfect fit. Thus, we can say that both accounts hold a particular place in the economy.

FAQs

1. What is the minimum balance required for a savings account and a current account?

The Minimum balance required to maintain a savings account and current account differs from bank to bank. You can find out about it by visiting the bank or the website. However, the current account requires much more minimum balance amount to be maintained than the savings account limit.

2. Can I convert my savings account into a current account?

Savings accounts and current accounts perform different tasks and have different features. If the former is used for saving, the latter can only be operated for frequent transactions. Hence, you cannot convert your savings account to a current account.

3. Is Savings Account safer than Current Account?

Both Savings Account and Current Accounts are safe to use with Deposit insurance schemes safeguarding your accounts up to a certain limit. Rest, the usage of Savings Account or Current Account dictates its safety and risks.