It is easy to wonder why a business needs a current account when savings accounts appear to do the job just as well. But there are significant differences between current account and savings accounts that business founders must be cognisant of.
This blog post will discuss the key differences between a Current account and a Savings account to help you decide which account type is right for your financial aspirations.
What is a Current Account?
A current account is designed to facilitate frequent/regular financial transactions by traders, business people, and entrepreneurs running their companies, firms, trusts, etc.
A Current Account usually offers unlimited transactions but doesn’t provide any interest earnings. It allows flexibility to withdraw more than the actual account balance. But there is a high minimum balance requirement to avail all the account benefits.
Read More: Benefits of Current Account for Business
What is a Savings Account?
As the name suggests, a savings account is designed to encourage and promote savings. The holder can deposit money conveniently, on which the holder can earn interest. It can be opened by an individual or jointly who intend to build wealth for their short-term and long-term financial goals.
Typically, a savings account offers interest income, and the minimum balance to be maintained is also slightly on the lower side with the facility to issue cheques.. However, the account holders are allowed a limited number of transactions.
Read More: FAQs on Basic Savings Deposit Account
Current Account vs Savings Account
Now that you understand the basics of a current and savings account, the key differences are between the two are as follows:
|Current Account||Savings Account|
|Purpose||To facilitate frequent business and trade transactions.||To save and accumulate wealth for future goals.|
|Suitability||It is mainly designed for organisations, business owners, companies, etc.||It is made for salaried people with regular income and short term financial goals|
|Interest Rate||Most current accounts do not provide any interest earning.||Offers interest-earning linked to a benchmark, such as a bank rate.(mostly 4% – 6%)|
|Transaction Limit||There are no restrictions on the maximum number of transactions.||Limited number of transactions are offered.|
|Balance Maintenance||The minimum balance to be maintained is higher than a Savings Account.||The minimum balance to be maintained is low.|
|Overdrawing facility||Account holders are allowed to overdraw for the short-term.||There is no overdraft facility available for Savings Account holders.|
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Choose the best current account for your business.
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What is Current Account?
A current account is primarily designed to facilitate frequent/regular financial transactions by traders, business people, and entrepreneurs running their companies, firms, trusts, etc.
What is Savings Account?
A savings account is designed to encourage and promote savings. The holder can deposit money conveniently, on which the holder can earn interest.
What is RazorpayX powered Current Account?
RazorpayX was born out of the need to deliver the best business banking experience for merchants. It reimagines how businesses manage money flows and simplifies banking for Founders, CXOs Chartered Accountants and finance professionals.
Is current account better than a savings account?
For businesses, a current account is definitely better than a savings account; but for individuals, a savings account would be more convenient and useful.
What are the disadvantages of current accounts?
Current accounts do not offer any interest income to the account holder. They also demand high MABs.