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A current account is a deposit account built for the unique and varied needs of businesses.
Are you wondering about the benefits of current account and the types and features of a current account?
This blog is just for you.
What is a Current Account?
A current account is a type of bank account that allows for more frequent and flexible access to funds than other types of bank accounts. They are typically used for day-to-day banking and are most suitable for those who regularly move money in and out of their account. They often offer services such as online banking, overdrafts, and credit facilities.
Opening a current account is your first step not just towards business legitimacy, but also toward smoother and more organised financial operations.
Top Features of Current Account
Here’s a list of the top features of a Current Account. Let’s have a look.
A current account provides instant access to funds 24/7, enabling customers to make payments, deposits and withdrawals as and when required.
A current account offers an overdraft facility to allow customers to withdraw more money than they have in their account, subject to a pre–agreed limit.
➡️Direct Debits/Standing Orders
Customers can set up direct debits or standing orders to make regular payments from their current accounts without having to remember to do it themselves.
Most current accounts offer online banking, enabling customers to check their balance, view transactions, make payments and transfer money from anywhere in the world.
Many banks now offer mobile banking, allowing customers to make payments and check their balances on the go.
Some banks offer multi–currency current accounts, enabling customers to hold multiple currencies in one account and switch between them as required.
➡️Interest on Credit Balances
Some current accounts may offer interest on credit balances, although this is usually minimal.
Many banks offer reduced fees or even free banking to current account customers, depending on their individual circumstances.
Did you know?🧐
RazorpayX-powered Current Account is a hassle-free current account for businesses that enables them to manage their finances more efficiently. It allows businesses to open and manage a current account, and also provides features like free unlimited transactions, free virtual cards and integrated APIs, free access to working capital, and free access to analytics.
5 Benefits of Current Account
From streamlining your business finances to imparting legitimacy to your financial operations, there are many benefits of opening a current account.
1. No balance? No problem
Picture this. It’s the end of the month.
On one hand, you’ve made sales and your payments are yet to come through while on the other, you have bills to pay and all your due dates fall before you receive any money.
What if, in the process of paying your month-end dues, the balance in your account hits zero? This is where the overdraft facility steps in.
One of the key benefits of current accounts is the option of overdraft. This means you can overdraw your account (withdraw money beyond your available balance) for a short period to meet working capital needs or deal with a short-term cash crunch.
Depending on the bank’s terms and conditions, your transaction history and your rapport with the bank, you may or may not be charged interest on the amount you overdraw.
2. Never run out of cheque leaves
Remember the time you opened a savings account? Your bank, most likely, gave you a chequebook for the year. Once you were out of leaves, you had to go back to your bank and pay to get another chequebook.
Another one from the host of benefits of current accounts is that you get an abundance of cheque leaves. As a current account holder, you get a set number of cheques that you can use every month, free of charge. This means you get a chequebook refresh every month (based on the terms of your bank) so you can transact without the frustration of running out of cheques.
3. Transact limitlessly!
As your business grows, so will your volume of transactions. In this situation, limits on the number of transactions are unthinkable.
One of the fundamental benefits of current accounts is the absence of transaction limits. This happens in two ways:
- you don’t have limits on the amount of any transaction
- you can make any number of transactions in a month, whatever way you prefer – online transfers, cheques, demand drafts, pay orders, or cash
4. Credit, set, grow!
When it comes to making them part with their money to fund you, financial institutions can be difficult to convince. And, a current account can give you quite the boost there.
A current account is a record of your transactions, including repayment of the previous debt if any. It also shows the lender your financial standing – and the basis of your financial projections.
Giving you credibility in the eyes of financial institutions and helping you maintain a sparkling credit score is one of the lesser-known but vital benefits of current accounts.
5. Current account, future plans
When you set out to make projections for your business, having messy financials doesn’t help.
One of the many benefits of current accounts is that they render your money matters legible. Current accounts help provide a clean record of your transactions for analysis, telling you exactly where your money is coming from and going, and painting a picture of your growth on a month-on-month basis.
Looking at the trends your current account is showing you and analysing them, you can chart out a plan for the future of your business backed by clean financial data.
Read more: 6 Differences Between Current Account and Savings Account
Documents needed to Open a Current Account
Here is a list of all the basic documents that are required to open a Current Account.
➡️Proof of Identity: Passport, PAN Card, Voter ID, Driving License, etc.
➡️Proof of Address: Utility bill, bank statement, passport, etc.
➡️Photographs: Passport–sized photographs.
➡️Initial Deposit: A minimum deposit is required to open a current account.
➡️KYC Documents: KYC (Know Your Customer) documents such as Aadhar Cards, PAN Cards etc.
➡️Signature Proof: Signature verification from a banker or a post office.
➡️Cheque Book: A chequebook for making payments.
Read: Documents Required for Opening a Current Account Online
Types of Current Account
Let’s have a look at the different types of current accounts.
Basic Current Account
A basic current account is a straightforward account that allows you to deposit and withdraw money, pay bills, and make payments online. It typically doesn‘t offer any additional features such as an overdraft or interest.
Business Current Account
A business current account is a type of account specifically designed for business owners. It is typically used to manage cash flow, pay suppliers and vendors, and keep track of expenses.
Premium Current Account
A premium current account is a type of current account that offers additional benefits, such as higher interest rates, insurance, access to exclusive discounts, and more. Premium current accounts are usually more expensive than standard current accounts and require a minimum monthly deposit. They are designed for customers who want more from their current account, such as access to preferential services, exclusive offers, and other benefits.
Joint Current Account
A joint current account is a type of account that is shared between two or more people. It is a great way to manage finances and pay bills together.
Offshore Current Account
An offshore current account is a type of account that is held in a foreign country. Offshore accounts may offer tax advantages, but they can also come with additional risks and regulations.
What is MAB(Monthly Average Balance)?
The monthly average balance is the average amount of money in a bank account over a given month. It can be calculated by adding up the total balance at the beginning of each day and dividing it by the number of days in the month.
The monthly average balance is used to determine the fees and interest rates associated with the account. It is important to maintain a high average balance to avoid fees and get the best interest rates.
Read: What is MAB? A Solid Explainer on Monthly Average Balance
- RazorpayX allows business owners to open current accounts, pay taxes, schedule payments, pay vendors seamlessly and check invoices from a single dashboard. This saves valuable time and effort.
- It fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.
- With RazorpayX Payroll, businesses can automate salary payments and provide insurance policies to their employees.
That’s not all. You can apply for a RazorpayX-powered Current Account in a matter of minutes.
Ready to supercharge your business banking?
Apply for your Current Account!
Frequently Asked Questions
1. What is a zero balance Current Account?
A zero balance current account is a current account that allows business owners to carry out transactions without any mandatory obligation of maintaining a Monthly Average Balance (MAB).
2. What is Monthly Average Balance for a Current Account?
Monthly Average Balance or Minimum Average Balance (MAB) refers to an account’s average closing balance on every day of the month. It is given by: MAB = sum of the closing balances for every day of the month/ number of days in the month.
3. Which is the Best current account in India?
New Age Business Banking platforms like RazorpayX has shaped the financial operation of businesses significantly with automated vendor payments, payroll, tax payments and so much more!