The moment you put your card at the local ATM, two account types flash on the screen, seeking you to choose one from where you’d want to source the cash. These are the savings and current accounts – which have been designed for specific purposes and cater to the financial needs of a particular group of users.

While all leading banks have on offer both these account types, there still are a number of differences between the two, in terms of the purpose they solve and a few other parameters. The remainder of this article focuses on drawing a distinct line between these two and taking your understanding forward.

  • Savings account

    • These are designed with the primary objective to help you save more

    • You can deposit your money in this account and earn a sum as interest (with the rate of interest generally ranging between 4-6%) that helps your money grow over a period of time

    • Banks generally cap the maximum number of transactions that you can carry out over a savings account. Post that limit, a nominal fee would be charged every transaction

  • Current account
    • This type of an account derives its name from the very objective it is designed to serve – routine transactions

    • A current account is typically more suited for business firms and companies that deal in cash transactions on a regular basis

    • Unlike a savings account, it doesn’t earn any interest – particularly because of the fluidity that these have to offer

    • It doesn’t cap the number of transactions that you can make

    Savings account vs. Current account


    Stated below are some important differentiator between these two types of accounts:

  • Objective
  • While a savings account is designed to promote the habit and discipline of savings among people, its current counterpart serves to facilitate regular and frequent transactions.

  • Fits best
  • A savings account is typically a good fit for salaried professionals who bring home a steady income every month, whereas a current account is ideal for business firms, companies, public enterprises and organizations that have to carry out regular transactions in order to finance their unique set of needs.

  • Limit on transactions
  • With a savings account, you would be looking at a definite cap on the maximum number (usually 3-5) of transactions (both financial and non-financial) you’d be allowed to carry out in a month, without attracting any extra charge.

    That being said, a current account doesn’t attach any limit on the number of transactions. With this type, you can never max out the limit, primarily because such an account is designed to help firms and businesses transact regularly and frequently.

  • Interest
  • A savings account earns you interest on deposits at a pre-decided rate that can range from 4-6%. However, this will vary, in keeping with the prevalent interest rate regime and the demand and supply forces.
    A current account, on the other hand, doesn’t earn you any interest. That’s because it is comparatively more flexible - in terms of the number of transactions it allows - than a savings account.

  • Minimum balance requirements
  • While a savings account mandates a low minimum balance (you can opt for specific types that don’t consider this requirement mandatory -- a ‘zero-balance’ savings account, for instance), a current account holds it imperative that you maintain a relatively high minimum balance.

Banks offer both savings and current account which you can open by filling out the designated forms.

Learn more about Mutual Funds for a good personal financial management.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.




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