Difference Between Savings and Current Account

Banking institutions around the world now offer dedicated patrons different accounts for their exclusive needs. The various types of bank accounts, now operative include:

• Individual Savings Account;
• Current Bank Account;
• Tax-Exempt Special Savings Account;
• Low-cost Account;
• Time Deposit or Certificate of Deposit Account;
• Negotiable Order of Withdrawal Account;
• Transaction Deposit Account;
• Money Market Deposit Account;
• Overdraft Free Account;
• Automatic Transfer Service Account;
• Joint Account;
• Transactional Account.

The primary difference in these different bank accounts lies in the account balance to be maintained and the segment of patronage. While most of the bank accounts now operative, like the savings bank account, cater to individuals, some like the current account, are designed to meet the exclusive needs of the business community. The accounts are all financial transactions between the customer or business entity and the bank. Both, Savings as well as Current accounts, earn a positive (debit) balance or a negative (credit) balance throughout the life of the account. While in the former the bank owes money to the client, in the latter, it is the other way round.

Savings Bank Account

These bank accounts are maintained by private individuals as well as retail financial institutions. The amount saved earns interest and is subject to the issue of checks, only if there is a clause permitting the same in the regulations supervising the transactions of the bank in question. The Savings Account enables the customers to repeatedly save liquid assets and subsequently earn monetary return in the form of interest. Savings Accounts are now offered by most credit unions, commercial banks, loan associations and mutual savings banks. The account has little or no scope to obtain additional funds, but the money set aside and interest earned may be accessed via any ATM or bank branch. These accounts also come with a debit card facility to enable quick transference of funds. A Savings Account, makes it mandatory to maintain a certain amount of fund-balance for a minimum period of time. There are no restrictions on access to funds via withdrawals, payments or transfers. Savings Accounts offer the customer an itemized list or balance sheet of all financial transactions conducted via a passbook or bank statement generated at the end of every month.

Current Bank Account

A current bank account is a transactional account designed specially for the business community. The account enables businessmen and entities to access flexible payment methods and directly distribute money to vendors and suppliers from the account. This is achieved via the check book facility, and special arrangements made to accommodate standing orders, debit card payments and direct debits into the account. A current account also comes along with an overdraft facility that enables the businessman to borrow money from the bank to meet any urgent business commitment. They also come along with the 'offset mortgage' facility that allows the business entity to purchase property and benefit from the reduction in the rate of interest. This 'offsetting' of a credit balance is basically offered against the incurred mortgage debt. They attract a higher rate of interest, both earned and payable, since the volume of transactions and savings are on the higher side. These accounts are designed to make business transactions free of personal-handling of liquid funds and ensure the availability of funds when most necessary via exclusive Internet banking. The account is run with the primary aim of ensuring that profitable business transactions do not run into deficit due to non-availability of funds.