A current account is where you put your money if you need an easy access to it. Such accounts place comparatively fewer limitations on where and when you can deposit or withdraw your money, which is why they are very popular among companies, firms, businessmen and public enterprises. The magnitude of transaction is pretty high and because of this, the balance in your current account does not reap interests, making the account an inefficient savings vehicle, but a highly effective transactional one.
Some people have a hard time understanding the difference between a savings and a current account. To begin, let us tell you that both these accounts serve very different purposes and financial needs of the user. So, before you plan to open a current account, here’s a list of questions you must be prepared to answer:
Q 1: How much interest will the balance in the current account earn?
Since the turnover of transactions is humongous, it becomes difficult for the bank to pay out interest. Different current accounts have different interest rates and they can vary significantly from one another. But generally, all current accounts pay out the interest, which is significantly lower than what a savings account gives.
Q 2: Can I use the current account in place of savings account?
Savings account serves a different purpose and is for people who don’t really have a whole lot of inflows and outflows. Current account, on the other hand, is for people who have significant inflows and outflows. To save money and earn interest on it, a savings account could be a better option, but expecting a high rate of interest on the balance in a current account is simply absurd.
Q 3: What are the types of current accounts?
Different types of current accounts are basic bank account, premium or packaged account, student account, youth account and standard current account. You can also open current account online. Each type has a specific functionality which differentiates it from the others.
Q 4: What charges are levied on a current account?
Apart from the monthly charges to run a current account, the following charges are also levied:
Fee for using debit card connected to the current account internationally.
Penalty on not paying overdrafts.
Penalty when a financial instrument bounces because of insufficient balance in the account.
Q 5: Are only companies allowed to open a current account?
Individuals, HUF’s, societies, partnership firms, public limited companies, private limited companies, and trusts are eligible to open a current account. Documentation and process of opening a current account is the same as savings account for individuals. However, the process and documentation may differ from one company to another.
Q 6: Can the balance in a current account be zero?
The monthly average balance (MAB) varies from bank to bank and most banks prescribe that it should not go below Rs. 25,000 in a current account.
Q 7: What documents are required to start a current account?
A canceled cheque
Address proof of the company/ individual
Identity proof of directors in case of a company
So, unless you want to open an account for business dealings, wherein you can easily access your money and make instant transactions, choose to open a savings account that not only encourages you to save more, but also allows you to earn interests.