Differences between Savings Account and Current Account

March 22, 2010 by Jay
Filed under Loans and Deposits

When opening for a bank account, you are given choices on the various types of accounts available. These accounts are specially designed to suit every individual banking needs. There are also accounts designed for the market-based structures and service groups of business class societies. The two common types of accounts offered by banks are the savings account and the current account. Let us discuss more about these accounts as well as their differences in this article.

The difference of a savings account and a current account lies on the individual’s patronization. Many banking institutions all over the world today offer different savings and current accounts to their dedicated patrons in accordance to their exclusive needs. These operative accounts include the following:

•           Transactional Account
•           Joint Account
•           Automatic Transfer Service Account
•           Overdraft Free Account
•           Money Market Deposit Account
•           Transaction Deposit Account
•           Negotiable Order of Withdrawal Account
•           Certificate of Deposit Account or Time Deposit
•           Low-cost Account
•           Tax-Exempt Special Savings Account
•           Current Bank Account
•           Individual Savings Account

A savings account is a personal finance method maintained by a private person and a retail financial institution. The money amount being saved in this account usually earns interests and can be issued to a third party by using checks. This bank account type allows a person to save money repeatedly while earning interests subsequently. The interests can also be in form of money. Today, a savings account is also offered by mutual savings banks, loan associations, commercial banks, and credit unions. It can be accessed in forms of ATM or debt card and passbook. The passbook usually reflects the itemized transactions made by individual on his account. However, the savings account may require minimum amount of cash funds as balance to maintain.

A savings account can be availed by different groups of people. It allows people to earn flat interest rates for its existing bank deposit amount. However, the interest rates may vary from bank to bank depending on the size, type, and nature of the bank.

A current account is specifically designed for the business communities since its functions are more transactional. In this type of bank account, the entities and businessmen are allowed to distribute money to supplier and vendors directly from the account. They are also allowed to access flexible payment terms for the account. The current account is achieved by the business communities via direct debits into the account, direct card payments, special arrangements to accommodate standing orders, and check book facility.

A current account is typically accompanied with an overdraft facility, which is use by businessmen in borrowing money from the bank to meet imperative business commitment. It also comes with an offset mortgage facility that allows the entity or businessman to benefit from the reduction of interest rates and purchase a property. However, this type of bank account attracts higher interest rates since its volume of savings and transactions are on the higher side. This applies to both payable and earned.