What is a current account and how is it different from a savings account?

Posted by Arjit Chalmela on December 18th, 2019

One of the most popular accounts opened in banks are current accounts. These types of accounts are generally preferred by people who have businesses. It is important to understand what is current account so that you can decide whether this account suits your requirements.

A current account is an account which provides more liquidity as compared to a savings account to the account holder. This account primarily exists to provide funds for the ad hoc liquidity requirements of the user. These type of accounts are generally meant for businesses. To attract businesses, many banks customize their current account offerings so that they can provide the services that the business needs for their funds.

There are major differences between a current account and savings account. The current account meaning is the availability of liquidity. However, this liquidity comes at a cost. The current account holder does not get any interest for the funds kept in this account. In contrast, a savings account holder gets a nominal rate. Apart from this difference, there are other differences between these two basic banking accounts.

Difference between current account and savings account:

1. Number of withdrawals:

A savings account is allowed to make 4 withdrawals in a particular month. In contrast, there are no such restrictions on a current account. There are no restrictions which is why businesses park their funds there. 

2. Cash management system:

Depositing cash into a savings account may not be allowed from other branches or from branches in other cities. However, current accounts have a specific cash management system where cash and cheques can be collected at local and regional branches with credit to the account at no extra charge. 

3. Withdrawal limit:

Current account holders can withdraw any amount. They can even withdraw over and above the balance in their account if they have the overdraft facility enabled. On the other hand, savings account holders can withdraw up to Rs. 40,000 from an ATM from their home bank and up to Rs. 10,000 in an ATM of another bank. 

4. Minimum balance requirements:

There are no minimum balance requirements for a current account. On the other hand, savings account has a minimum balance requirement. This minimum balance ranges between Rs. 2,500 to Rs. 25,000 depending on the bank. 

5. Banking services and charges:

Banks issue additional cheque books to current account holders free of charge. Apart from that, they are allowed free demand drafts every month. These services are chargeable for a savings account holder.