Banking comes in many shapes and sizes. While you might be familiar with cash, Credit Cards, chequebooks, and Online Banking, the most common forms are Current and Savings Accounts. People use these accounts every day, but it is essential to understand how they work so that you can make the best financial decisions.
To ensure you have a proper understanding of Current Account vs Savings Account, let us review some basic information about each account type:
Definition
Current Accounts are a necessity for most people every day. You keep your money in them to pay bills and any spare funds. Your Current Account is also where any income, such as your salary, goes when it lands in your Bank Account. Most people manage their Current Accounts in one way or another every day, whether withdrawing cash from an ATM, using their linked ATM or Debit Card outdoors or checking their balance online.
Savings Accounts often offer much better interest rates than Current Accounts because banks want customers to leave their money in their savings rather than spending it every day.
Suitability
Current Accounts are best suited for traders and businessmen who conduct many transactions in a day as they receive or give products and services to customers and clients. These accounts encourage depositing huge sums. You need to maintain a minimum balance. In return, you can deposit any amount of money.
Meanwhile, Savings Accounts are suitable for people with regular monthly income. You can save part by being disciplined and not withdrawing funds frequently. Open a Bank Account for achieving short-term financial goals while saving up for a large investment or purchase.
Account opening procedure
Opening either type of account should take much less time than finishing reading this article! You need some form of ID, such as a passport or birth certificate, and income and address proof, such as a bank statement from another institution. Depending on the premium of the account, there may be extra requirements for account opening.
Interest rates
While comparing Current Account vs Savings Account, understand the effect of interest rates on your funds. The Current Account interest rates are lower than Savings Accounts. Since you make more transactions on your Current Account, the bank has a longer hold of your money due to limited withdrawals and transactions.
Withdrawals
A Current Account holder can withdraw money multiple times in a day. Meanwhile, you can withdraw money from a Savings Account only three or four times in a month. Withdrawals more than this could attract penalties or may need further coordination with the bank.
Conclusion
A Current Account is best for business owners, entrepreneurs, or Forex traders who regularly make transactions within a day. At the same time, a Savings Account is suitable for regular employees who expect their monthly salary to save and budget for their living expenses.
