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What Is a Current Bank Account and How Is It Different from a Savings Account

A current account can be opened with any commercial bank and since there are a lot of transactions taking place on a regular basis, these accounts don’t earn any interest.

Anshika Bajpai |

Updated:February 14, 2019, 1:58 PM IST
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What Is a Current Bank Account and How Is It Different from a Savings Account
A current account can be opened with any commercial bank and since there are a lot of transactions taking place on a regular basis, these accounts don’t earn any interest.
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Current bank accounts are opened by companies, firms, public enterprises and businessmen who tend to do a lot of financial transactions on a daily basis. You can deposit, withdraw and do contra transactions using a current account.

A current account can be opened with any commercial bank and since there are a lot of transactions taking place on a regular basis, these accounts don’t earn any interest. But they don’t have any limit on the number of transactions too.

How is it different from a savings account?

● Since a savings account is opened to save money for the long run, it allows the users to only do a limited number of transactions every month while current account has no such limit and transactions can be done on a daily basis.

● A savings account is suitable for salaried employees or people who get their income once a month or who are looking to serve a short term financial goal like vacation, wedding, buying a car etc. A current account is more likely to be taken by entrepreneurs and traders who use their accounts frequently.

● Savings account bear you an interest of around 4-6% while it does not hold true for current accounts. Current account holders get no income as interest on their deposit.

● Savings account don’t have any provision of overdraft whereas current account holders can easily get an overdraft.

● The minimum balance that is supposed to be kept in a savings account is usually lesser than the current account.

Both these accounts serve different financial needs of the customer helping them manage their money better. It’s best to choose the account that serves all your needs.

So why should you open a current bank account?

To keep personal and professional finances separate -
For freelancers and sole proprietors who are not different in terms of identity from his/her own business, keeping a separate current account helps segregate personal finances from business income and expenses and manage things better.
This helps in better financial planning and you know how exactly your business is performing at any given time.

To keep it more professional-
A current account in the name of your business makes things more professional and helps building a more serious image. This can in turn drive growth for your business by establishing credibility.

Worthy of Credit-
Having a current account goes a long way in establishing your credit worthiness to lenders and banks. Credit worthiness is also checked by banks between each other to validate before providing a line of credit to a particular consumer. If you are into an import/export business, providing a guarantee or a line of credit to foreign counterparts can help drive your business.

Overdraft-
Businesses can have uncertain monetary periods. Having a current account can give you easy access to Overdraft facilities, which essentially lets you withdraw more than the balance in the account for a temporary period, to plug in shortfall of funds.

Streamlining Bank Transactions-
Current account holders enjoy a host of value added services from banks, since they are beneficial for the banks as well. Banks do not need to pay any interest on a current account and businesses generally transact in big monies through their current account on a day to day basis.

Now that you know more about what and how a current account can help you with, you can opt for one to fulfil the needs of your business enterprise.

To know more about current bank accounts, click here.

This content has been created in association with SBI.
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