Savings vs Current Accounts – the key differences

By: Bank of Baroda
Fri Dec 28, 2018
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Opening a bank account is one of the first steps we take towards financial independence. We start with small savings that we deposit each time we come upon extra money by opening a savings account. As our financial requirements change, we find the need to open an additional account, to conduct daily transactions. Such an account is known as a current account. The government has mandated that you must link your Aadhaar Card to all your bank accounts irrespective of the type of account you hold. In this article, we shall highlight the major differences between savings and current account and understand the procedure to link your Aadhaar card with either account.

Savings and current accounts – how they differ

Both, savings and current accounts come with their own set of features which makes them different in several ways. Both accounts are meant to address the various financial needs of account holders. Let us look at the significant factors that distinguish the current account and savings account.

The purpose of the accounts

Savings accounts are designed by banks to encourage savings among account holders, whereas the current account is intended for people who need to make frequent transactions.

The type of account holder

Savings account are best suited for individuals with a steady source of income; salaried employees, for instance. This type of account is an excellent option for anyone with short-term financial goals in which one can keep depositing or withdrawing money as per their requirements. The government encourages everyone to open savings accounts. Current accounts, on the other hand, are best suited for people in business, companies, firms, organisations, public enterprises and so on. They are meant for people who need to carry out repeated money transactions.

The frequency of transactions

Individuals, who have a savings account, are permitted to make a limited number of transactions every month. You typically get 3 to 5 transactions every month, including financial transactions like fund transfers, cash deposits and withdrawals to non-financial transactions such as getting account statements, ordering cheque books etc. The difference between current account and saving account in this respect is that you can carry out unlimited monthly transactions of all kinds.

Interest

You can earn a half-yearly or annual interest of 4% to 6% per annum (depending upon your bank and account type) on your savings account. You are also allowed to accumulate an unlimited amount of funds in these accounts. On the other hand, you do not earn any interest on the monies parked in a current account.

Average minimum balance

Each bank asks the account holder to maintain a fixed sum of money or minimum balance into their accounts. One has to pay a penalty for non-maintenance of minimum balance. You are usually required to maintain a low minimum balance in savings account, (which can even be zero in case of a salary/ zero-balance account), whereas as current account holders are required to maintain relatively high minimum balances.

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