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Current Account: Definition and What Influences It

What is Current Account?

A current account is a type of deposit account maintained by people who regularly conduct a very high volume of transactions with banks. Current accounts are related to liquid deposits and provide a wide range of tailored solutions to facilitate financial transactions.

Current Account: Definition and What Influences It

Furthermore, current accounts allow the use of the bank's check (cheque) feature to pay creditors. Cheque payments to creditors can be made with ease using this account. Current accounts typically don't pay interest and have greater minimum balance requirements than savings accounts. The primary benefit of this account is that the holders can quickly use an overdraft facility up to a certain limit.

Most commercial banks offer the option of opening a current account; furthermore, the number of transactions that can be conducted with them is typically not restricted. Businesspeople like owners, partnership businesses, trusts, associations of persons, private and public organizations, etc., are the main ones who open current accounts.

Money could be deposited and withdrawn by customers at any time without prior notice. The major goal of the "current account" is to enable account holders to perform their financial transactions without experiencing any difficulties.

Types of Current Accounts

Banks provide a range of "current accounts" to fulfill the diverse banking requirements of their clients. It is essential to note that different banks may offer different current account types. The account type that is best suited for the kinds of transactions that one intends to perform should be chosen accordingly. The different types of accounts offered by the majority of banks are listed below:

Basic Current Accounts

It is appropriate for clients with limited/low incomes, such as pensioners, young people, and others. It makes it very simple for the clients to handle their finances. The maximum daily cash withdrawal is subject to a few limitations, though.

Standard Current Accounts

Holders with this account type are required to maintain a minimum average monthly balance. There is no interest earned on the money deposited into the account. However, it offers its clients overdraft, chequebook, and debit card services, among other things.

Premium Current Accounts

This account category gives its members special offers and benefits. Large-value transactions are best handled with this account.

Packaged Current Accounts

This type of current account offers several benefits and perks to account holders. It includes special features such as travel insurance, medical support, and more.

Foreign Current Accounts

This account type is offered to NRIs and others who often want to transact in foreign currencies.

Features of a Current Bank Account

One of the most important prerequisites for beginning a business is having a "current account". Banks now provide a variety of attractive offers and incentives on current accounts to accommodate the various requirements of businesses. Some of the basic characteristics of a current account are mentioned below:

  • Current accounts have a greater minimum balance requirement than savings accounts.
  • Transactions permitted by a current account go beyond those of a savings account.
  • It makes routine transactions, like money transfers and cash & cheque deposits, easier.
  • Individuals, proprietary businesses, public and private enterprises, associations, trusts, etc., can all operate current accounts.
  • There are no daily transaction limits.
  • Penalty fees may be charged for failure to maintain the minimum balance.
  • The KYC requirements must be met for current accounts just like they (banks) do for savings accounts.
  • There cannot be more than one current account for a single firm.
  • The major goal of the "current account" is to facilitate commercial transactions.
  • These days, some banks even give customers interest on their current accounts.
  • Interest is charged on short-term loans taken out by the account holder from the bank.

Advantages of Current Account

Some of the pros of current account are mentioned below:

  • Current accounts provide orderly processing of significant amounts of receipts and/or payments.
  • These accounts allow limitless withdrawals and are subject to cash transaction fees/charges.
  • Deposits made into current accounts opened at the bank's home branch are not subject to any restrictions; customers can also make deposits at other places by paying the required minor fees.
  • A current account can be used to issue cheques, pay orders, or demand drafts for direct creditor payments.
  • Additionally, current account holders have access to overdraft services.
  • Current accounts are much more attractive to customers when there are modest interest gains on the account balance.
  • Businesses also receive a number of additional advantages, such as free inward remittances and deposit and withdrawal privileges.
  • There is no restriction on businesses on how much money they can transact from their current accounts, but whatever banking cash transaction tax the government is levying, it applies accordingly.
  • It helps the account holder's creditors by providing them with information about the account holder's creditworthiness through an interbank connection.
  • It helps the nation's industrial development. Businessmen would have a hard time managing their companies without the assistance of current accounts.
  • It enables businesspeople to perform crucial business transactions swiftly and smoothly by offering Internet and mobile banking.
  • It also offers a number of additional advantages (benefits), including the ability to deposit and withdraw cash from any place.
  • It enables easy transfer of funds across multiple locations.

Disadvantages of Current Account

Despite the many advantages of current accounts, there are also a few disadvantages to be aware of. It's important to note that current accounts differ between banks, so be sure to research the options offered by banks. Some of the cons of current account are mentioned below:

  • Some current accounts do receive interest, but the majority do not. Additionally, the interest rates on current accounts that pay interest are often lower than those on savings accounts. In contrast to a savings account, which is more frequently used for long-term savings that won't be handled frequently, a current account is generally utilized like cash and isn't meant for funds to stay still.
  • Most banks charge higher fees to their customers with current accounts as these accounts usually offer additional services.
  • Additionally, banks may place a cap on the number of free demand drafts and chequebooks given to current account customers.
  • The biggest drawback of a current account is that holders are required to keep a significant minimum balance in their accounts at all times. Banks may impose penalties if the required balance is not maintained.
  • A current account could be useful if one makes lots of transactions; however, the bank will charge a certain fee for each transaction.
  • Current account holders cannot schedule automatic bill payments like they can with a savings account. This is a huge drawback if an individual or firm only has one operating account for the business and has regular payments to pay.

What are the various methods for making a cash deposit into a Current Account?

Any of the following ways may be used to deposit funds into a current account:

  • Cash deposits at any of the bank's branches
  • Deposits with cheques
  • Online transfers
  • Wire transfer from abroad

Current Accounts offer Various Types of Access

Any of the following approaches may be used to access a current account for everyday cash transactions:

Home Branch

A person can go to their parent branch for a range of banking requirements, including "Cash Withdrawals", "Deposits", "Financial Assistance", etc. However, even at a bank branch, there may be fees associated with withdrawals or deposits over a specific limit.

Cheque Facility

It is one of the conventional methods for taking money out of a "current account". Many clients still favor using cheques, although online banking is replacing the majority of physical transactions.

Automated Teller Machines (ATMs)

One can withdraw money from any nearby ATM without going to a branch. ATMs enable cash withdrawals even after regular banking hours, although the withdrawal limits are modest.

Online Banking

Account users have access to a variety of banking functions through the online banking service, including the ability to transfer money, clear payments, view statements and balances, and many more. Since one can conduct transactions even outside of regular business hours, it is one of the most popular ways to access a current account. With only a few clicks, one can transfer funds from their account without having to stand in line or fill out any paperwork. Nevertheless, internet transfers have a limitation, above which a cheque is required to complete the transaction.

Phone Banking

The majority of the top banks offer phone banking services that let consumers conduct a variety of tasks over calls. Using the phone banking feature, one can review their transactions, send payments, or check their balance.

How does one choose the right current bank account?

Opening a current account is mostly done to facilitate smooth commercial transactions. It makes it simple for clients to handle large-value payments and bulk transactions. Making the appropriate account selection is thus very crucial. When selecting the best account choice, all the factors should be taken into consideration. The following are some important factors to consider while selecting a current bank account:

Minimum Balance

A customer's account should always have a minimum balance in order to keep it from expiring or becoming inactive. The minimum balance requirement for current bank accounts is considerably larger than for savings accounts. This is important for the user to remember because different account variants have different minimum balance requirements.

Fees, Charges, and Overdraft Costs

The charges and fees differ from one account to another. Important factors such as fees for cash withdrawals, demand draughts, money transfers, and overdrafts, among others, must be taken into account by users.

Cash Deposit Limit

The maximum amount that can be deposited for free each month varies depending on the bank and the kind of account.

Savings Account vs. Current Account


Savings accounts are intended to help account holders save and increase their funds. Banks provide a perk in the form of interest on the money deposited, which is a great advantage of the saving account. The current account, on the other hand, enables hassle-free operation of regular commercial transactions. Banks offer current account customers overdraft and loan services to make sure that there are no funds shortages.

Transactions Permitted

Savings accounts typically have specific transactional limits. One can only make a specific number of withdrawals from their account each month-usually between three and five-at ATMs and bank locations, depending on the bank. A fee could be applied if someone makes more transactions than are permitted. Deposit and withdrawal limits are uncapped and unrestricted for current accounts. If necessary, they can easily withdraw money multiple times each day.

Balance Maintenance

Maintaining balance is another aspect where a Savings Account and a Current Account contrast. Typically, a savings account has a lower minimum balance requirement; in contrast, a current account has to maintain a significantly larger minimum balance requirement. If the account's minimum balance is not maintained, then the respective account holders have to pay the necessary fees (penalty) for not maintaining the funds. However, the charges may vary from bank to bank.

Interest Rate

Banks pay interest on the money placed in savings accounts, which typically ranges from 2 to 4.5% annually, where the interest is calculated on the daily outstanding balance and is typically credited to the account every quarter. Banks and other financial organizations have different time frames for when interest will be credited and may vary from one another. On the other hand, banks do not usually pay interest on the money received and placed in a current account.


A savings account can be used by anyone for their personal needs and is suitable for those who are salaried or receive a monthly income. A current account, on the other hand, is generally best for traders, businesses, corporations, etc., who often need to access their funds.

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