Difference between Savings Account and Current Account

Posted on Tuesday, February 20th, 2024 | By IndusInd Bank

When it comes to managing your finances wisely, selecting the right bank account is a crucial decision. Your choice between a savings and a current account can significantly impact how you handle your money. While both play a role in managing finances, their functions, benefits, and limitations differ. Individuals need to grasp these distinctions to determine which account aligns better with their financial goals. Let’s simplify the complexities and explore the unique features of current and savings accounts, including the convenience of an instant savings account. 

Understanding what is Savings and Current Account: 

A savings account is the most common type of bank account, specifically designed to save money. It can be opened by an individual or jointly by one or more individuals. Opening an online savings account has become straightforward nowadays, and you can complete the process within minutes by completing your KYC and keeping other documents, like Aadhar Card, PAN Card, etc., available. You can also enjoy benefits such as high interest rates, seamless fund transfers, and secure online banking. 

Current accounts get their name from being designed for regular transactions, making them ideal for entities like firms, companies, public enterprises, etc. Unlike savings accounts, current accounts don’t earn interest because they are meant to be highly flexible. Moreover, there’s typically no limit on the number of transactions allowed in current accounts. 

How to choose which one is for you 

A savings account is suitable for individuals with a reliable income stream, particularly suited for salaried employees. It serves as a useful financial tool for those with short-term objectives, such as saving for an upcoming vacation, funding a wedding, or acquiring a new vehicle. 

On the other hand, a current account emerges as the ideal choice for business owners, companies, organisations, and public entities. This is primarily due to the nature of their daily financial activities, involving frequent transfers and transactions. The current account is designed to accommodate the dynamic financial needs of entities engaged in regular money transfers, making it an essential tool for seamless business operations. 

Understanding Transactions and Interest in current account vs savings account 

Banks that provide savings account options often impose a monthly limit on the maximum number of transactions a user can perform. Generally, 3 to 5 transactions, encompassing both financial and non-financial activities, are allowed each month without incurring any fees. The account typically earns interest at a predetermined rate, commonly around 4%. Due to the restriction on the number of transactions, these accounts offer a simpler way to accumulate more money over time. 

Current accounts do not have an upper restriction on the total number of transactions one can complete. This is attributed to the primary purpose of current accounts, which is to facilitate frequent transactions. Unlike savings accounts, current accounts typically do not accrue interest. This lack of interest is a trade-off for the account’s flexibility, enabling users to engage in numerous transactions without limitations. 

Minimum Balance Criteria 

Savings accounts generally have a low minimum balance requirement, with many banks allowing for zero-balance accounts. On the other hand, current accounts often mandate a higher minimum balance to accommodate the frequent transactions associated with this type of account. The specific minimum balance criteria can vary between different banks. 

Understanding the concept of Overdrawing 

Overdrawing, or withdrawing more money than available, is typically not allowed in savings accounts; banks generally do not offer or permit overdraft facilities for this account type. In contrast, current accounts often come with overdraft facilities, allowing users to withdraw funds exceeding their account balance under certain conditions. It’s essential to be aware of the overdrawing policies specific to each account type. 

Explore the advantages of IndusInd Bank Instant Savings Account online! If you’re considering opening an account with IndusInd Bank, start your journey by clicking instant savings account to get started. Discover the top features of IndusInd Bank Online Savings Account here. Your path to smarter banking is here! 

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.