How is a Current Account Different from a Savings Account?
Irrespective of whether you are an individual or a business owner, managing your finances will always be a priority. You may have come across savings and current accounts that are offered by several banks and financial institutions in India. The purposes of both these accounts are different, while they also have varying features and advantages. Sounds confusing? Here’s simplifying both these accounts and their key aspects along with illuminating their differences for your benefit in this article.
What is a Current Account?
Current Account is a type of bank deposit used for various daily transactions. It allows its owner to deposit and withdraw money, make payments to customers, clients, suppliers, or partners, and manage his/her expenses. The transaction limit is higher in comparison with savings accounts, which makes the service beneficial for both companies and individuals who make a relatively high number of transactions every month. Most banks offer current accounts with a chequebook, free RTGS and NEFT transfers, and debit cards.
However, the current account and its features are available only to eligible customers. Wondering if you are eligible for a current account and what documents you need to be eligible? We'll explain it to you in detail.
Documents Required & Eligibility Criteria for Current Account
To open a current account, you'll need to provide the bank with specific documents, including proof of identity, proof of address, and proof of income. The eligibility criteria for a current account may vary from bank to bank, but generally, you'll need to be at least 18 years old and have a steady source of income. Plus, most banks like Unity Small Finance Bank have an average monthly balance (AMB) requirement for current accounts. So, if you open a current account you will have to ensure that you can meet the AMB requirement.
Now that you know all about current accounts let us explain how they are different from savings accounts. But first, let us give an in-depth look at what savings accounts are.
What is a Savings Account?
On the contrary to a current account, a savings account is a type of bank account introduced specifically for saving money and earning interest. It is meant for individuals who want to save money to meet expenses and emergencies or invest long-term. The transaction limits on these accounts are low and usually do not include unlimited NEFT and RTGS transfer facilities, as in the case of a current account.
Some banks also offer different types of savings accounts, catering to varying needs. But how can you open a savings account? We'll give you a brief explanation of the eligibility and document requirements for savings accounts.
Documents Required & Eligibility Criteria for Savings Account
Similar to a current account, you'll need to provide the bank with proof of identity, proof of address, and proof of income. The eligibility criteria for a savings account may vary from bank to bank, but generally, you'll need to be at least 18 years old and have valid ID proof. However, minors can also open a savings account with a guardian or parent.
Now that we have explained exactly what current and savings accounts are let us explain how these two accounts are different.
Current Account or Savings Account: Which One Should You Choose?
The main difference between current and savings accounts is their purpose. Choosing between a current account and a savings account depends on your financial goals and needs. A current account is the better option if you're looking to manage your day-to-day business transactions. For startups who need the advantage of easy transactions, startup current accounts are the best choice for them. On the other hand, if you're looking to save money and earn interest, a savings account is the better option.
It's essential to consider the fees and charges associated with both types of accounts before making a decision. NEFT and RTGS transfer charges can add up to a hefty amount for businesses. Unlike savings accounts, current accounts usually offer unlimited free NEFT and RTGS transfers, allowing businesses to operate smoothly at no extra cost.
Conclusion
In short, it's important to understand the features and benefits of both current and savings accounts before making a decision. By doing so, you can choose the account that fits your financial goals and needs and avoid any unnecessary fees or charges. So, take the time to research and compare your options to make the most of your finances.
