There are two main types of accounts that banks have; current account and savings account. A savings account is more popular with individuals. It bears a nominal rate of interest for the balance maintained in this account and has restrictions on the number of withdrawals that can be made. A savings account comes with other conditions like a minimum balance that has to be maintained, a limit on the cheque leaves that are issued etc. When it comes to a business, this may not be the right type of account given their additional requirements for liquidity. To suit this purpose, banks have current accounts.
A current account is an account that has no minimum balance requirements. It also typically does not have the same restrictions like a savings account.
Here is everything you need to know about a current account:
- Additional liquidity:
A current account does not have any limits on cash withdrawals in a month like a savings account does. This is especially beneficial to a business which can face ad hoc cash requirements and demands at any point of time. In return for the additional liquidity that the bank offers, the balance kept in a current account does not earn any rate of interest. Some banks may offer interest if the balance matches a particular amount.
- Cash management:
A current account holder can get different facilities with regards to cash management. Depending on the type of current account, free demand drafts are provided by the bank. Banks also facilitate free cheque collection in different branches to make it easy for the business to collect cash. Extra cheque leaves are provided per month to make payments. There are special portals for companies and other businesses to manage their monthly payments to vendors.
- Types of current account:
There are different types of current accounts that have different features based on the business. Banks generally provide customized accounts that provide additional features to businesses. However, these features may come at a cost of maintaining a higher minimum average balance i.e maintaining a higher balance to get some additional features. Most banks have the different type of current accounts and their rates and fees clearly displayed on their website. It is better to go through these before current account opening.
- Easy borrowing:
It is easy for a current account holder to withdraw more funds than the balance in the account. This can be done by activating the overdraft facility in the current account. The interest on overdraft is only charged for the amount that is actually withdrawn and not the amount that the bank sanctions.
- Current account opening:
You can opt for online or offline mode for current account opening. This account can be easily opened by filling an account opening form online or by filling the form offline and submitting the required documents in the bank branch. There are no restrictions on the number of current accounts that a person or business can have.
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