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You've probably heard the adage, "Take care of the pennies and the pounds will take care of themselves." While this English proverb might be century-old, it remains relevant to one’s approach to managing finances.
Many people tend to keep cash at home, but storing your money in a bank account is generally safer and more convenient. Banks offer easy access to your funds through ATMs, online banking, and mobile apps. Plus, they enable you to grow your corpus over time through interest.
On top of security and access, banks come with a variety of perks: internet banking for quick bill payments, mobile banking for on-the-go transactions, and even rewards programs that earn you cashback or points.
Now, with all these benefits, you might be wondering - which type of bank account is best for you? Most people have two options: Savings Accounts and Current Accounts. In this article, we'll compare these accounts, including their definitions and major differences. We’ll also discuss their similarities, so you can choose the right fit for your financial goals.
As the name suggests, a Savings Account is one where you can park your excess money or your savings. It allows you to deposit money that you don't need immediately but may need in the near future. Each time you deposit money into this account, your savings grow. Additionally, you earn interest on your savings, which is usually calculated annually or semi-annually, with interest rates varying among banks. Generally, these rates range from 3% to 5% on your savings.
With DBS Bank, you can open a Savings account in a snap using the digibank by DBS app. Moreover, you get 5X benefits through exclusive offers, memberships and vouchers. You can even explore our different types of savings accounts such as DBS Bank Savings Account, Growth Savings Account, Growth Plus Savings Account, and DBS Bank PRIME Savings Account.
Here are some of the top benefits of Savings Accounts:
If you run a business, be it a retail shop, a grocery store, or a multi-national company, managing daily cash flow (withdrawing and depositing large amounts of funds) is crucial. To facilitate such transactions, you need a Current Account. Unlike Savings Accounts, Current Accounts are non-interest-bearing accounts (don't earn interest) but come with high daily deposit and withdrawal limits. With a Current Account, you get access to several financial tools such as short-term loans, overdraft facilities, and more to help you sustain and grow your business.
Now that we know the fundamentals of Current and Savings Accounts, let’s understand their differences.
There are primarily six differences between these two types of bank accounts, which include:
Savings Accounts and Current Accounts serve different purposes.
Savings Accounts allow individuals to save and grow their money. Banks offer an incentive in the form of interest on the savings parked, which helps build a corpus. On the other hand, Current Accounts are designed to conduct everyday business transactions without hassles. They often come with features like loan extension and overdraft facilities to give you flexibility in case you have a shortage of funds.
Savings Accounts generally come with certain specific limitations when it comes to transactions. For instance, you can withdraw funds from your account at ATMs and bank branches only a certain number of times per month, typically ranging from 3 to 5 times, depending on the banks.
If you exceed the number of transactions permitted or use other bank ATMs beyond the permitted limit, the bank may charge a penalty fee.
As for Current Accounts, there are no caps or restrictions on deposits or withdrawals. You can withdraw money multiple times a day without any hassle.
Another difference between a Savings Account and a Current Account is the requirement for balance maintenance. Your bank typically requires you to maintain a specific amount in your Savings Account consistently to keep it operational. This balance can range from as little as INR 500 to over INR 10,000, depending on the bank. With Current Accounts, you must maintain higher balances, which may be higher than INR 50,000 or INR 100,000 at all times, depending on the account type.
Current Account holders can utilise the overdraft facility to withdraw more money from their account than their actual balance. If a Savings Account holder needs more money than their balances, they can apply for a Personal Loans. If you already have a Savings Account with the bank, you can get Personal Loans quickly.
In a Savings Account, the account holder earns interest on their savings. However, in a Current Account, you don't receive interest payouts because the deposited funds are primarily used for business transactions rather than being held for saving purposes.
Regardless of the type of account you choose, the requirements to open it are generally the same and the process is quick.
In most cases, you'll need a valid ID and address proof such as PAN card, Aadhaar card, Passport, driving license, etc., which carries identity and address details as per RBI guidelines. However, it's important to note that some premium Current Accounts may require additional requirements to open them.
Plus, many banks now allow you to conveniently open both Savings and Current Accounts directly through their mobile app, saving you a trip to the branch.
Here’s a table summarising the difference between Current Accounts and Savings Accounts:
Factors
Current Accounts
Savings Accounts
Interest
No interest
Modest interest
Purpose
Conduct everyday business transactions
Save and grow money
Required Balance
Higher balance maintenance, often for business purposes
Low balance requirement
No. of Transactions
No caps or restrictions
Limited withdrawals, may incur additional fees/charges
Opening Process
Some premium accounts may have additional requirements
Simple requirements, quick process
Suitable for
Business Owners
Individuals
After exploring the differences between Current Accounts and Savings Accounts, let's discuss their similarities.
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Understanding your financial goals and transaction needs is essential before choosing between Savings and Current Accounts.
Opt for a Savings Account to accumulate corpus, create an emergency fund, or fulfil specific financial objectives (like your child's college fees, home repairs, retirement fund, etc). Although it usually yields modest interest rates, it's directed towards long-term saving. However, keep in mind that Savings Accounts often limit the number of transactions you can make each month. This makes them less suitable for everyday spending.
A Current Account is better suited if you require an account for daily financial transactions such as bill payments, purchases, or income receipts. It allows easy access to your funds and is ideal for people who run small businesses or need flexibility in managing their daily financial needs.
The decision between a Savings and a Current Account doesn't just end at their purpose. You should also consider the associated maintenance fees and interest rates. Savings Accounts generally have lower fees and offer some modest interest. On the other hand, Current Accounts may include higher fees and offer minimal to no interest.
Now that you know the differences between a Savings Account and a Current Account, you can opt for one that best suits your requirements. You can also maintain both types of accounts, customising each to meet your unique financial requirements.
Remember to select a bank that offers access to your account through different portals, including internet, mobile, and SMS banking, UPI transactions, international ATM-cum-debit card, and additional services.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.
