Which account holders can enjoy overdraft facilities

This post was most recently updated on November 6th, 2019

Whether you should open a Current Account or a Savings Account, it’s purely depend on your needs, nature and frequencies of transactions. Each of these accounts offer different banking facilities, benefits, restrictions that will determine how you access and manage your money. Let us find out the basic differences between a current account and a savings account.

Current Account is generally meant for businessmen, firms, companies, and public enterprises etc. that have frequent banking transactions. Here banks pay no interest on the balances held therein, but such type of accounts can be helpful to have overdraft limits against security or can have a clean (without any security) overdraft limit. Also there is no limit of number of transactions in such type of accounts. But sometime banks may levy charges for the services it renders to the account holder.

In case of Savings Account, one has to maintain minimum balance which varies from bank to bank. Normally private sector banks ask to maintain Rs. 10,000 where PSU banks offer it at a minimum of Rs. 1,000 also. There are also some customised accounts specifically designed for children, women, students where bank offer Rs. 500 minimum also. Banks also provide zero balance account majorly to salary linked accounts. All these depends on banks own terms and conditions, but you need to read through all these conditions before signing into the account opening so that later you can avoid any unwanted charges for not following the terms. Of course banks are at least known for this.

Until RBI deregulated the savings bank interest regime during 2011 banks were offering 4% interest per annum. Post the deregulation came into effect banks became free to decide the interest rate they wanted to pay on their savings bank accounts, depending on their liquidity and profitability preferences. Now Banks like; Kotak Mahindra Bank, Yes Banks are offering saving account interest around 5%-6% whereas SBI, ICICI Banks & HDFC Banks are still at 3.25%-4% per annum.

Also note, in case of savings account, if you are doing many transactions with high amount, banks has the right to ask the source of income for the transactions. Even banks have to report these to the IT department as part of Annual Information Report (AIR).

Key differences between Current Account & Savings Account:

Purpose: The main purpose of holding/opening savings bank account is, it encourages savings which earns interest whereas a current account is used for the purpose of execute frequent transactions.

Users of Account: Savings account can be operated by salary earners, students, house wife, small traders and others; in short any one can open a savings bank account subject to fulfilment of respective bank norms and KYC process. In the other hand current account is operated by businessmen/proprietors and other organisations. However there is no restriction that a non-businessman or salaried can open a current account.

Number of Transactions: Current account has no limitation on the number of transactions that can be done in a particular month. Also there is no charge on the amount being transacted. However a savings account has some limitation on number of transactions in a month. There is also a limitation on the amount that can be deposited or withdrawn from a savings bank account.

Overdraft Facilities: Current account facilitates the account holder to get overdraft facility, but in case of savings account there is no such overdraft facility. The overdraft facility is however restricted by the overdraft limit determined by the bank.

Preferences: Current account holders are given more preference as compared to savings account as they transact huge sums in business transactions which in turn beneficial to the bank. But this doesn’t say savings account holders become estranged from bank services. Banks also offer certain privilege account in savings account category where the holder has to maintain certain minimum balance higher than normal savings account to enjoy little better service. Some banks offers cash pick up and drop facilities for savings account holders, also there are flexibilities given on the number of transactions done by these privilege customers.

Fixed Deposits & Recurring Deposits: A savings account holder can open fixed deposits and also run recurring deposits into his/her account, but mostly such FDs and RDs are not offered in Current accounts. Keeping the in view of competitions in mind few banks are now offering FD facilities on current account as well.

Regardless of whether you decide you need a savings account, a current account or both, getting the best account possible is essential. Isn’t it?