Banking instruments are at the core of how consumers interact with their finances. Sometimes they can be a little confusing. Here is an article elucidating the difference between a savings and current account.
The current and savings accounts are two of the most basic instruments of modern banking. Being aware of the marked differences between the two can come in handy for any individual who makes use of the financial machinery devised by the banks of today. While different banks have different rates that are applicable for current and savings accounts, there are other factors that can be considered to be commonly different. Here are the major differences between a current and savings account:
Savings accounts, as their names imply, exist to help people with saving money. It is the basic introduction to banking that anyone can have. A savings account comes attache with multiple features that encourage the act of saving. For example, there is interest added to the amount of money you add into your saving account. This guarantees that the more money you put in your account, the potential for bigger financial benefits in the future are high. Savings accounts are a good way for young people to start shoring up money for their future. They can help develop a habit and eye for savings from an impressionable age.
A current account or a checking account is suitable for people or organisations that need to be able to access cash on the go. A current account holder is not incentivised by savings. Interest rates would not be something that worries him/her. The point is to have a bank account that will let you access your own money for personal purposes without any restrictions. Certain types of bank accounts, usually,the kind that concentrates on accruing interest rates and making future profits, have issues with locking up cash. This inaccessibility is what the checking account works against.
The Main Differences
- Interest Rates : While regular savings accounts offer interest rates that usually vary from bank to bank, current accounts do not offer interest rates.
- Transactions: Savings accounts place restrictions on the number of free transactions a customer can actually draw from the bank.While current accounts offer unlimited free transactions.
- Minimum Balance: The minimum balance required for savings accounts are much lesser than current accounts. Some banks even offer zero balance accounts for savings accounts. However, banks have always required customers to keep a reasonably large amount as part of current account schemes.
- Overdraft: Savings accounts generally do not allow customers to withdraw more money than their current balance. Current accounts, however let the customer overdraft, but sets a limit to the amount that is permissible to be overdrafted.
Savings and current accounts are setup for different people with different financial priorities. Their uses can vary depending on exactly what your need is at the current point in time. While both are extremely useful financial instruments, they are distinctly different from each other and should be treated as such.