Savings vs Current Accounts the key differences
03 Jul 2019
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 especially business transactions. Such an account is known as a current account. 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 especially for business purpose.
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 post which you are charged a certain amount for each transaction. 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 quarterly, half-yearly or annual interest of 3.5% 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 higher minimum balances.
Now that we have highlighted the main differences between the two accounts let us understand how to link Aadhaar card with bank account (for DBT benefits only). You can visit the bank and follow the below steps
- Ask for an Aadhar linking application form at the bank; enter your current/savings account details and Aadhaar Number.
- Attach a self-attested photocopy of your Aadhaar card with the application and carry your original Aadhaar card to furnish to the bank for verification purposes.
- The bank will accept your request and link your account to Aadhaar.
- You will receive an SMS notification from the bank when the Aadhar link to bank account is successfully completed.
You can also link your Aadhaar card to your bank account through internet banking by going on the “My Account” section and entering your Aadhaar card details and verifying using OTP or through your mobile banking app in the same way
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Savings account opening
Want to open a savings account? Follow these steps
A savings account is perhaps the first interaction a person has with a bank. It is the most basic of bank accounts. It offers the safety that a depositor looks for, plus interest rates and the flexibility of withdrawing money anytime and anywhere.
Before looking at the features of opening a bank account let’s first look at how to open one.
How to open a savings account
There is two main ways to open a savings bank account:
Walking to a branch
You can go to your nearest Bank of Baroda branch and ask the bank officials how to open an account. You are asked to fill out a form. The bank official will ask for details required as per the ‘Know Your Customer’ (KYC) format that includes address proof, identity proof, statutory government registrations like a PAN card will be required along with your photographs. You will also be asked if you want to open a joint account with anyone else. In the case of a child, a minor account is opened that is operated by the parent.
If you want to open your savings bank account online, you can do so either through a computer or a mobile way of opening a form. Most details are captured online in this case with a minimum physical interface with the bank.
Who can open a Savings Bank Account?
Each bank has its own Terms and Conditions which needs to be satisfied before an account is opened. Most of these conditions are common and set by the central bank – Reserve Bank of India.
At the time of opening an account, you will be made to sign a number of documents which include that he has understood all the Terms and Conditions of the bank. It is thus necessary to read through the document before signing. Only illiterate depositors can use their thumb impression.
Signature and KYC Documentation
Bank signature is the key to operate the account. Signature mismatch not only leads to heartburns but also other problems which can result in blocking of the account. You will need to be careful while signing the form and maintain this signature throughout life.
KYC Documentations have increased over the year. The main documentation needed is for the identity of the customer and identifying his address.
In identity proof the documents that are generally valid are – passport, driving licence with photograph, Permanent Account Number (PAN Number), Voters identity card, Job card issued by NREGA (National Rural Employment Guarantee Act, 2005) – attested by a government official and an Aadhar card or any other document issued by the Unique Identification Authority of India.
For address proof, you can submit any of the above documents apart from the PAN card
Banks can offer Pass Book facility for a savings account holder for free or for a small fee. You, however, can access the statement of your account online using internet banking.
Safety of savings accounts
Savings account in a bank is generally insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC).This insurance facility offers an assurance that your money is safe.
Types of savings account
Within the savings account, different banks offer a variety of accounts depending on the utility of the account and the age of the account holder.
Some banks offer a zero-balance account, but these are done for salaried accounts or for some professionals and students.
Things You Will Need To Open A Bank Account
A leading bank like Bank of Baroda offers a bouquet of savings accounts that you can pick from to park your salary and income from other sources with, while earning some interest based on the type of bank account you choose to open.
At the end of the day, your needs are as unique as you. From daily transaction to fulfilling your professional goals, our savings bank accounts are one stop solution for all your needs. Access your account and transact from anywhere, anytime with our digital banking services.
Before you do that, here are a few documents you will need to keep handy to open a savings bank account.
What are KYC norms?
Know Your Customer norms apply to everyone who wishes to open a bank account. KYC is certain basic information that the banks need to have about the applicant. This information is backed up by necessary documents submitted by the applicant to authenticate his/her identity. This is basically to weed out potential frauds and monitor suspicious high value transactions that may be related to illegal trades, money laundering or other financial scams.
The documents you will need to submit while applying for a bank account are-
Proof of identity
For this, you can provide
Voter ID Card
Government/Defence ID Card
Pension Payment Orders issued to the retired employees by Central/State Government Departments, Public Sector Undertakings
Photo ID Cards issued by Post Offices
Photo identity Cards issued to bonafide students by a University, approved by the University Grants Commission (UGC) and/or an Institute approved by All India Council for Technical Education (AICTE)
Proof of address
You can provide any of the following as proof of address
Income tax assessment order
Utilities like electricity bill, landline bills-not older than 2 months.
Letter from employer/public authority (should be validated by bank)
Voter ID card
Retired government employees can produce pension payment orders
Registered leave and license agreement or sale deed or lease agreement.
Please note, every time there is a change of address or change in any other detail furnished to the bank, the applicant will need to immediately notify it to the bank along with updated document proofs.
2 latest passport size photographs
The Next Steps
After having all the documents in place, applicants need to fill up the bank account opening form. Fill up all the mandatory fields. For questions or enquiries about the form, a customer representative is always available for help during the branch’s working hours.
Now, the application form along with the above documents needs to be submitted at the bank branch. Applicants should keep the originals with then, which will be required for verification purposes.
Bank executives examine and verify the documents and that the details submitted in the form matches with that on the document proofs like name, date of birth, address, signature among others.
Applicant may be asked to make a token deposit for account opening. This does not apply to zero-balance accounts.
The applicant will receive a debit card and other welcome literature on the address submitted by them in the application form.